Validity of Addition only on basis of screen shot of journal entry taken from tally data in pen-drive and its copy

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Validity of Addition only on basis of screen shot of journal entry taken from tally data in pen-drive and its copy

Short Overview: Neither during search nor during assessment proceedings, any material was found to show that the amount contained in the journal entry was paid by the assessee firm to anyone at any time only on the basis of journal entry, section 69 could not, therefore, be invoked.

On the basis of data contained in the electronic media and the loose papers, AO inferred that assessee had made undisclosed investment in purchase of land and accordingly, he had made additions in all the three years on account of undisclosed investment in land invoking section 69 which had been the subject-matter of dispute before the CIT(A) who had granted relief to RA and his brother KA, both of whom were partners in the assessee firm. In course of verification made with regular books of account, it was found by AO that the seized material was not covered in the regular books of the assessee firm. In the query letter, the AO referred to a screenshot of a balance sheet as on 31-3-2010 drawn in the name of M/s. Aarti Colonizer Company (‘ACC’) wherein the closing stock was reflected at Rs. 15,53,99,615 which was taken from the tally data in pen-drive.

It is held that The journal entry dt. 4-9-2007 was only an accounting entry passed for introducing the land as capital contribution by the partners who purchased the lands and therefore, this cannot be considered as evidence of investment. A perusal of the journal entry dated 4-9-2007, which had been one of the basis for addition, shows that through this journal entry, the lands was purchased by the two persons named in the journal entry and was being introduced as their capital contribution in the partnership firm. Since these journal entries have been relied upon by the AO, it had remained undisputed that the lands were not purchased by the assessee but by the two persons as named in the journal entry. As rightly contended by the assessee, that all the lands, except one, described in the assessment order on page Nos. 2 and 3, were purchased prior to formation of the assessee-firm. There was yet another convincing reason that in all the three years under appeal, there were no sales effected by the assessee firm and the business of the assessee firm had not even started, which was also evidenced by the profit & loss account of the three years. When the source of income/revenue for the assessee was missing in the sense that the business had not even started during all the three years and since during search, nothing was found to establish that the assessee had any undisclosed income from any other source, the discretion vested in the AO should have been exercised in favour of the assessee and the addition should not have been made. AO had not made any enquiry, whatsoever, from different vendors of the lands and not even from the two persons named in the journal entry, who, as per the journal entry, introduced their lands as capital contribution in the partnership firm. For making addition under section 69, there had to be some material establishing actual investment and therefore, it was not justified to invoke the said section merely on the basis of inference.

Decision: In asses see’s favour.

Relied: CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 0080 (SC) and Smt. Rajabai B. Kadam L/H of Late S.B. Kadam v. Asstt. CIT (2002) 83 ITD 229 (Pune-Trib) : 2002 TaxPub(DT) 327 (Pune-Trib).

Referred: CIT v. Naresh Khattar (HUF) (2003) 261 ITR 664 (Del) : 2003 TaxPub(DT) 987 (Del-HC) and CIT v. Dinesh Jain (HUF) (2013) 352 ITR 629 (Del) : 2013 TaxPub(DT) 24 (Del-HC), Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC) : 1956 TaxPub(DT) 171 (SC), CIT v. Lavanya Land (P) Ltd. (2017) 297 CTR (Bom) 204 : 2017 TaxPub(DT) 1954 (Bom-HC) and Sahib Housing (P) Ltd. v. Dy. CIT ITA No. 246/Hyd/2011, dt. 24-1-2014.

IN THE ITAT, RAIPUR BENCH

PARTHA SARTHI CHOUDARY, J.M. & MITHRA LAL MEENA. AM.

Dy. CIT v. Aarti Colonizer Company

IT(SS) A Nos. 178 to 180/Rpr/2014

A.Ys. 2008-09, 2009-10 & 2010-11

1 July, 2019

Appellant by: P.K. Mishra

 Respondent by:R.B. Doshi

ORDER

M.L. Meena, A.M.

These appeals by the Revenue are directed against the consolidated Order, dated 19-5-2014 of the Commissioner (Appeals), Raipur (hereinafter referred to as “the Commissioner (Appeals)”), in respect of the assessment years 2008-09, 2009-10 and 2010-11 wherein, the grounds of appeal, reads as under :–

“Assessment year 2008-09

  1. Whether in law and on facts and circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the addition under section 69 of the Income Tax Act, 1961 of Rs. 10,06,43,050 on account of undisclosed investment in land made by the assessing officer on the basis of seized material ?
  2. The order of the learned Commissioner (Appeals) is erroneous both in law and on facts.
  3. Any other ground that may be adduced at the time of hearing.

Assessment year 2009-10

  1. Whether in law and on facts and circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the addition under section 69 of the Income Tax Act, 1961 of Rs. 2,59,57,040 on account of undisclosed investment in land made by the assessing officer on the basis of seized material ?
  2. The order of the learned Commissioner (Appeals) is erroneous both in law and on facts.
  3. Any other ground that may be adduced at the time of hearing.

Assessment year 2010-11

  1. Whether in law and on facts and circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the addition under section 69 of the Income Tax Act, 1961 of Rs. 57,63,597 on account of undisclosed investment in land made by the assessing officer on the basis of seized material ?
  2. The order of the learned Commissioner (Appeals) is erroneous both in law and on facts.
  3. Any other ground that may be adduced at the time of hearing.”
  4. There is common issue is being involved in all the three appeals of undisclosed investment in land on the basis of seized material except difference in the amount of investment under section 69 of the Act, and therefore, all these three appeals are being adjudicated by this consolidated order.
  5. Briefly, the facts as per record, are being taken fromITA No. 178/Rpr/2014, as a lead case for the sake of convenience. In the case of assessee, search under section 132 was conducted on 23-6-2010 and during the course of search, a pen drive was found containing some data as also some loose papers. On the basis of data contained in the electronic media and the loose papers, the assessing officer inferred that the assessee has made undisclosed investment in purchase of land and accordingly, he has made additions in all the three years on account of undisclosed investment in land invoking section 69 which has been the subject-matter of dispute before the learned Commissioner (Appeals) who has granted relief to the assessee.

3.1. The assessing officer has observed in the assessment order that during search under section 132 conducted on 23-6-2010 several incriminating materials were found from the possession of Shri Rajesh Atlani and his brother Shri Kishore Atlani, both of whom were partners in the assessee firm. The incriminating material included loose papers and data stored in electronic medium. In course of verification made with regular books of account, it was found that the seized material is not covered in the regular books of the assessee firm. He issued a query letter dt. 5-3-2013 requiring the assessee to explain the contents of the pen drive and the loose sheets. In the query letter, the assessing officer referred to a screenshot of a balance sheet as on 31-3-2010 drawn in the name of M/s Aarti Colonizer Company (In short, “ACC”) wherein the closing stock is reflected at Rs. 15,53,99,615 which was taken from the tally data in pen drive. The assessee was required to explain why the entries in the balance sheet be not taken as correct reflection of accounts. He also referred to the tally data maintained in the computer with xls file showing the details of purchase under the heading “Aarti Infrastructure”. The details of purchase of land as appearing in the excel file were reproduced in the query letter which were also reproduced in assessment order and referred to as table 1 therein and as per these details, the land at Dunda was purchased for Rs. 9,79,79,700. Thereafter, he referred to a screenshot of a journal entry which shows that the value of land is Rs. 9,79,79,700 against which the amount recorded in regular books was Rs. 2,33,86,759 thereby giving a difference of Rs. 7,45,92,941. This screenshot is also stated to be taken from tally data in pen drive. He thereafter referred to the details of purchase of another land admeasuring 32.68 acres consisting of 27 different pieces of land purchased on different dates. The assessing officer observed that in the electronic data, record of individual lands with two sets of purchase price relating to them is maintained under the heading “Aarti Colonizer Company” and the information was reproduced in the query letter in tabulated form, referred to as table 2 in the assessment order. As per the tabulated details, spread over a period falling in financial years 2007-08, 2008-09 and 2009-10 the land admeasuring 32.68 acres was purchased for a consideration of Rs. 11,90,37,955 out of which the amount recorded in regular books was Rs. 5,99,73,090 and thus there was investment of Rs. 5,90,64,865 not reflected in regular books. The year wise details of the undisclosed amount are as under :–

Financial year 2007-08 Rs. 2,73,44,233
Financial year 2008-09 Rs. 2,59,57,035
Financial year 2009-10 Rs. 57,63,597

3.2 It was observed by the assessing officer that the incriminating material relating to purchase of land and the closing stock of unsold land in Dunda area, during the financial year 2007-08 and the record maintained in the electronic media i.e., pen drive was seized from the residence of Shri Kishore Atlani as well as other seized material, for an evidence of investment in land, and source of funds brought in by the partners by way of capital. The pen drive seized from the residence of Shri Kishore Atlani contained tally data of the accounts of the assessee for the years 2008, 2009 and 2010. Accordingly, the assessee was required to explain the difference of Rs. 7,45,92,941 and Rs. 5,90,64,865.

3.3 The assessee explained before the assessing officer that the entries found in the electronic media were fake and they do not portray the true picture of its business. The assessee explained that some of entries were made by Mr. Ajay Atlani (elder nephew of Shri Rajesh Atlani, who is one of the partners of the assessee firm and elder son of Shri Kishore Atlani), who was drunkard, his treatment was being made from the famous hospital of Hyderabad named Hope Trust. Ajay Atlani was addict of alcohol and due to this addiction, he was not given responsibility of any work. Since he was looking for some job and was not having any technical knowledge of computers etc., he was allowed to do some work in the business premises and for this, the accountant of the firm used to teach him MS Word, accounting, excel etc. and for this purpose, they used to take raw data, some data relating to Shri Rajesh Atlani’s business and some relating to other family member’s business. After making entries or making files, they used to check those data and all such work was mostly done in pen drive but some data was also kept in laptop. It was also explained by the assessee that some loose documents which were the printout of those data were also kept by them. Due to these reasons, most of the documents found and seized were not related to the assessee firm and it represented practice work by Ajay Atlani, which he had done on the basis of entries in regular books of account. The assessee further explained that although some books were exact copy of the books maintained by the assessee, some entries were made in wrong periods, name of some books were changed etc. The assessee thereafter explained some of the specific loose papers and the contents of pen drive and pointed out that how the data contained in the pen drive or in the printout is fake. The explanation of the assessee has been discussed on page Nos. 6 to 12 of the assessment order. The crux of the argument of the assessee before the assessing officer was that the entries are fake and have no relevance or authenticity and it was the handiwork of Shri Ajay Atlani, who was suffering from health disorders. The assessing officer rejected the explanation of assessee observing that Shri Ajay Atlani is a regular tax payer and showing income and healthy capital in his accounts and it cannot be accepted that such entries were made only out of whim or with the intention to harm the assessee. He further observed that the data cannot be imagined by any unconcerned person and the extent to which the entries made therein matches with the affairs of the assessee shows that it was under control and management of some person directly related to the management of the firm. The assessing officer further observed that in the line of business of the assessee i.e., real estate business, undisclosed investment and cash payments out of books is a common feature hence there is preponderance of probabilities that record of undisclosed transactions of assessee was made in the seized material. Rejecting the explanation of assessee, the assessing officer concluded that the transactions are in nature of investments and the assessee failed to explain it. He, accordingly, invoked provisions of section 69 and made addition of Rs. 10,06,43,054 (Rs. 7,32,98,821 + Rs. 2,73,44,233); Rs. 2,59,57,035 and Rs. 57,63,597 in assessment years 2008-09, 2009-10 and 2010-11 respectively.

  1. In appeal, while deleting the addition, the learned Commissioner (Appeals),inter alia, observed vide para 4.5 as under :–

“4.5 I have gone through the observations of the assessing officer and submissions of the appellant. Admittedly, the assessing officer has made the addition only on the basis of details and data contained in pen-drive after applying the theory of preponderance of probabilities holding that the said details represent record of undisclosed transactions of assessee, who is doing real estate business, where undisclosed investments and receipts from forms common practice. On the basis of these materials, the assessing officer has presumed that the referred land was purchased and the appellant has made investment of the amount recorded in the data. He rejected the appellant’s contention that the data contained in the pen-drive is unauthentic and incorrect and did not address the inconsistencies pointed out to support the claim. He did not rebut the appellant’s contention that nothing over and above the amount recorded in the registered deeds was paid by bringing necessary details. In this connection it is relevant to consider the observations of the Hon’ble Tribunal, Hyderabad Bench ‘A’ in the case of Sahitya Housing (P) Ltd. v. Dy. CIT (supra), where the Hon’ble Tribunal has held that the assessing officer shall have the basis for assuming the unexplained credit in the case of the assessee and it is not possible to assess the income of the assessee in the absence of any evidence on arbitrary basis. The unsubstantiated material found in the pen drive cannot be considered in the hands of the assessee as a conclusive evidence so as to make additions towards un-explained credit, Undisputedly, no other material suggesting payment of higher amounts was recovered during search. It is trite law that burden is on the Revenue to prove that the price had been under stated and no addition is possible without any inquiry. In this case, there is no cogent material to support the conclusion that the appellant has actually paid higher amount than that recorded in the registered documents and the assessing officer did not conduct any inquiry to bring some material to corroborate the data contained in the pen drive. The affidavits filed were rejected without examining the deponents. Hence, the theory of preponderance of probabilities has no role to play. Under these circumstances, looking to the facts of the case and the legal position settled in this regard, I am of the considered opinion that action of the assessing officer making additions of Rs. 10,06,43,054 (assessment year 2008-09), Rs. 2,59,57,035 (assessment year 2009-10), Rs. 57,63,597 (assessment year 2010-11) under section 69 of the Act solely on the basis of data contained in pen-drive is not correct. Therefore, the addition is deleted. This ground of appeal is accordingly, allowed.”

  1. Before us, the learned Commissioner-Departmental Representative argued that during search, incriminating material in the form of data in pen drive and some printout from computer data was found from the residence of Shri Kishore Atlani, brother of a partner of the assessee firm. This fact is not disputed by the assessee. In the pen drive and the loose papers found during search, extensive working depicting undisclosed investment in purchase of land was found. It is not the case that the lands, details whereof were found in the electronic media, are not belonging to the assessee and this fact has remained undisputed. When incriminating evidence relating to investment in land was found, it was the responsibility of the assessee to have properly explained the same in absence of which the addition was rightly made by assessing officer. He then referred to the explanation given by the assessee and argued that it is unbelievable that Shri Ajay Atlani would be making fake entries to such an extent. The very fact that many of the transactions in the pen drive and loose papers matched with the entries in regular books goes to show that the data in electronic media is authentic and reliable which could be made the basis of addition. In that view of the matter, the contents of the pen drive and the loose papers deserve credence and were rightly relied upon by the assessing officer for making addition. He referred to the chart reproduced at page Nos. 2 and 3 of the assessment order and at the end of the chart, three set of figures has been mentioned which clearly shows that the first figure represents the actual consideration while the 2nd figure represents the recorded portion and the 3rd figure represents unrecorded investment. Such extensive papers having been found during search, learned Commissioner (Appeals) was not justified in deleting the addition. He then referred to the chart on page Nos. 4 and 5 of the assessment order and argued that in respect of each land, three figures are contained in the last 3 columns which clearly goes to indicate that the 1st column is in respect of actual consideration, the 2nd in respect of the disclosed value and the 3rd being the undisclosed part of investment. Here also he argued that it is not the case of the assessee that these lands were not purchased by it. In that view of the matter, the assessee should have explained the entries and in absence of any explanation, addition was bound to be made. He thereafter referred to the screenshot of the balance sheet as on 31-3-2010 which is forming part of the questionnaire issued by the assessing officer and in this balance sheet also, higher value of land is reflected. He also referred to the journal entry, screenshot whereof is placed in the query letter which supports the contention that the value of the land was higher than what is recorded in the books of the assessee. He argued that in support of the contention that the entries in the pen drive and the loose sheets represent fake entries made by Shri Ajay Atlani, there is nothing available on record to support the so-called explanation of the assessee and therefore, it was rightly rejected by the assessing officer. He argued that the explanation put forth by the assessee is a cooked up story to escape assessment. He argued that the burden was on the assessee to show that the impugned investment was not made by it and since this has not been demonstrated by means of any evidence the addition was rightly made by the assessing officer and learned Commissioner (Appeals) erred in deleting the same. He took us through various observations of the assessing officer in the assessment order to drive home the point that the data in pen drive and the entries in the loose papers cannot be considered to be fake entries; that the assessee has not proved that all the entries in the pen drive were fake entries and therefore, addition was justified. In support of argument, he placed heavy reliance on various observations made by the assessing officer in the assessment order and concluded that the addition was rightly made by the assessing officer and therefore, the same may kindly be restored.
  2. Per contra, learned Authorised Representative of the assessee argued that so far as assessment year 2008-09 is concerned, the addition of Rs. 10,06,43,054 made by the assessing officer comprises of two additions, one of Rs. 7,32,98,821 on account of 26.48 acres of land described on page Nos. 2 and 3 of assessment order and the other of Rs. 2,73,44,233 in respect of 32.68 acres of land details whereof are given on page Nos. 4 and 5 of assessment order. He addressed separate arguments in respect of both the additions. His opening argument is that provisions of section 69 could not be applied to the additions made by assessing officer. He argued that for invoking section 69, the initial burden is on the assessing officer to establish that any payment or investment was made by assessee, which has not been recorded in the books of accounts and in respect of which the assessee is not in a position to explain the source to the satisfaction of the assessing officer. He took us through the language of section 69 in favour of above argument. He relied upon the decision of Hon’ble Delhi High Court in the case ofCIT v. Naresh Khattar (HUF) (2003) 261 ITR 664 (Del) : 2003 TaxPub(DT) 0987 (Del-HC) and CIT v. Dinesh Jain (HUF) (2013) 352 ITR 629 (Del) : 2013 TaxPub(DT) 0024 (Del-HC). In both the above cases, it has been held that to invoke section 69B, the burden is on the Revenue to prove that the real investment exceeds the investment shown in the books of accounts of the assessee. He thereafter argued that since the language of section 69 and section 69B is almost identical, the law laid down in the context of section 69B will apply in the case of an addition under section 69 also.

6.1. As regards to the addition of Rs. 7,32,98,821, he argued that this addition has been made on the basis of journal entry dt. 4-9-2007 and the details of the land given in table 1 of the assessment order, which is a print out of the data contained in the pen drive. Other than this, there is no other basis of this addition. In context of the journal entry dt. 4-9-2007, he argued that the screen shot of the journal entry is placed at page No. 67 of paper book-1, which is the query letter issued by the assessing officer; that the journal entry is just an entry in respect of introduction of capital asset into the partnership firm and the journal entry by itself does not prove that the assessee made any payment of the amount recorded in the journal entry; that there was no evidence that the amount covered in the journal entry was paid outside the books of accounts and the journal entry does not prove any payment by the assessee whatsoever and therefore, the test of section 69 is not satisfied so far as this addition is concerned. He then took us through chart on table 1, given on page Nos. 2 and 3 of the assessment order and argued that this print out from the pen drive does not prove or show that any payment was made by the assessee; that the entries in the chart are not evidence of any payment outside the books of accounts and there is nothing on record to show that the alleged difference amount was paid ‘by the assessee and therefore, the provisions of section 69 is not satisfied here also. Thus, neither the journal entry nor the chart given on page Nos. 2 and 3 of the assessment order proves any payment by the assessee which has remained unaccounted. He argued that the initial burden has not been discharged by the assessing officer and therefore addition made invoking section 69 is illegal and not, justified.

6.1.1 He argued that the land described on page Nos. 2 and 3 of assessment order was not purchased by the assessee but by two other assessees, as is evident from the narration in the journal entry. He took us through the narration wherein there is a reference of introduction of the land into the partnership firm as capital contribution and therefore, the journal entry is not an evidence of investment/payment as the land was not purchased by the assessee firm. When the land was not purchased by the assessee firm, there is no question of invoking section 69 and there is no question of payment of on money. He also argued that no evidence or corroborative material was found during search to show that the impugned payment was ever made by assessee firm.

6.1.2 He explained that the assessee firm came into existence on 4-9-2007, as it is also mentioned in para 3 of the assessment order. If the details of land described in table 1 (pp. 2 and 3 of assessment order) are perused, it will be found that the lands were purchased prior to formation of the assessee firm as is evident from 2nd column of table 1 reproduced in the assessment order, except the last one. In this background, he argued that when the lands were purchased by two other assessees that too prior to formation of the assessee firm, there is no question of payment of on money by the assessee.

6.1.3 He further argued that during assessment years 2008-09, 2009-10 and 2010-11, there was absolutely no sales made by the assessee as is also mentioned in para 3 of the assessment order. He submitted that ever since inception of the firm and till the end of financial year 2009-10, no business had been commenced by the assessee firm and therefore there was no source of revenue at all for the assessee and in that view of the matter, it cannot be perceived that the assessee could earn any undisclosed income out of which alleged undisclosed investment would have been made. In support of this argument, he relied upon profit & loss account of the three years under appeal (APB-2, pp. 309, 311 and 337). A perusal of the profit & loss account shows that there were absolutely no sales made during the three years. He thereafter argued that the word used in section 69 is “may” which gives discretion to the assessing officer either to bring to tax an amount or not. He argued that even if the explanation of assessee is not found satisfactory, a further question should arise for consideration as to whether in the facts of the case, addition is required to be made or not. He argued that in view of no sales having been made in the three years and no material having been brought on record that the assessee earned income from any other undisclosed source, the discretion to tax an amount or not should have been exercised by the assessing officer in favour of the assessee. For this argument, he relied upon the decision in the case of CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 0080 (SC) and Smt. Rajabai B. Kadam L/H of Late S.B. Kadam v. Asstt. CIT (2002) 83 ITD 229 (Pune) : 2002 TaxPub(DT) 0327 (Pune-Trib).

6.1.4 Learned Authorised Representative of the assessee submitted that the addition has been made only on the basis of three figures given at the end of table 1 depicted on page No. 3 of the assessment order. He explained that as per the reasoning of assessing officer, the 2nd figure is the figure as per books of accounts of the assessee; that in the table, the 2nd figure is Rs. 3,78,70,462 whereas the amount recorded in the books of the assessee is Rs. 2,33,86,759 which has also been mentioned in the last but one para of page No. 3 of the assessment order.

6.1.5 He concluded argument on this addition that the assessing officer has not conducted any enquiry from any of the vendors and therefore, no addition could have been made without bringing any material whatsoever on record, especially when such grave dispute was being raised by assessee.

6.2 Coming to the second addition of Rs. 2,73,44,233 comprised in the addition of Rs. 10,06,43,054 made by the assessing officer, the learned Authorised Representative of the assessee argued that apart from the chart found during search, no other corroborative material like day-to-day cash book/journal/Ledger or details of payment to vendors was found. He argued that no entries of purchase of individual lands were found anywhere and no entries of any unaccounted payment whatsoever was found during search. The number of parties in respect of these land purchases are many and therefore, if any unaccounted transaction was entered into, some account of the parties should also have been maintained and found during search. He further argued that if such huge transactions were really undertaken, some accounts would also have been maintained and found. He argued that during the search and during the assessment proceedings no unaccounted assets or expenses or excess cash etc. was found to the extent of the addition made by assessing officer. On the basis of above arguments, the learned Authorised Representative of the assessee tried to drive home the point that in absence of any corroborative material whatsoever found during the search or brought on record during assessment, addition could not have been made only on the basis of the chart which was found during search. He again argued and relied upon the two decisions of Hon’ble Delhi High Court rendered in the context of section 69B wherein it was held that for invoking section 69B, initial burden is on the assessing officer to establish that any unaccounted payment was made. He argued that the chart found during search is not an evidence of payment and therefore, section 69 could not have been invoked. He further argued that the assessing officer has not made enquiry from even a single vendor whereas the list contains various vendors. He argued that before the assessing officer affidavit of two vendors were filed, copy whereof was submitted before us during the hearing asserting that against the land sold by them to appellant, whatever consideration is mentioned in the sale deed, nothing over and above that was received by them and that the land has been sold for the price mentioned in the sale deed. He argued that the assessing officer did not conduct any cross examination or verification of the two vendors and therefore, the contents of the affidavit became conclusive. In this regard, he relied upon the decision in the case of Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC) : 1956 TaxPub(DT) 0171 (SC).

6.2.1 Regarding the contents of the pen drive found during search, the learned Authorised Representative of the assessee argued that the entries in the pen drive are unauthentic and fake entries, totally unrelated with the assessee. He explained that the entries were made by Shri Ajay Atlani, son of Shri Kishore Atlani from whose residence the pen drive was found. The said Shri Ajay Atlani had turned alcoholic and was under depression and eventually died thereafter. The said Shri Ajay Atlani was taught accounting by the accountant of the assessee group, with the idea that he would be engaged in some gainful employment which may help him to come out of his bad habits. During this process, the data in the regular books of different concerns of the group were used by the accountant and the said Shri Ajay Atlani and. on the basis of such data/entries, he created new entities in tally data giving short names and made entries therein so that the regular entries and the learning entries do not get mixed up and these learning entries are clearly identified. Such work was mostly done by Shri Ajay Atlani in the pen drive, which was found during search. In the above background, it was argued by learned Authorised Representative that the entries in the pen drive are not genuine but fake entries and no addition could have been made on the basis of such unverifiable fake entries.

6.2.2 As regards to the authenticity of the pen drive, on the basis of which entire additions have been made, the learned Authorised Representative of the assessee argued that while search being undertaken in the case of assessee, simultaneous search was also undertaken in the case of Aarti Infrastructure and Buildcon Ltd. and the pen drive found from the residence of Shri Kishore Atlani, containing similar fake data in respect of the above named company was found and in the assessment of above named company addition was made on the basis of the contents of the same pen drive, In the case of above named company i.e., Aarti Infrastructure and Buildcon Ltd., the dispute travelled up to the stage of Hon’ble Tribunal and before the Tribunal, similar argument was raised that the entries in the pen drive are fake. Copy of the order of Tribunal has been placed by the assessee at page Nos. 350 to 376 of paper book-2. Learned Authorised Representative of the assessee took us through Tribunal’s order, at page No. 365 of the paper book-2 and pointed out that the above referred explanation has been reproduced at page No. 16 of the Tribunal’s order. Thereafter he took us through page No. 370 of the paper book wherein Hon’ble Tribunal observed that apart from the contents of pen drive, no corroborative evidence, entry in any records, documents etc. was found during search and observing so, learned Commissioner (Appeals) deleted the addition. In these facts, this Bench of Tribunal affirmed the order of Commissioner (Appeals). The learned Authorised Representative therefore argued that the matter in dispute stands resolved by this Bench of Tribunal in the above case wherein it has been accepted that the entries in the pen drive found from the residence of Shri Kishore Atlani are fake and therefore he requested that similar view may kindly be followed in the present appeals also.

6.2.3 He submitted before us a chart giving details of the explanation submitted before the assessing officer explaining that how the entries in the pen drive are fake and not authentic. He further submitted that similar explanation was submitted before the assessing officer which has been summarised in form of a chart. He took us through some of the explanations to show that the entries in the pen drive are fake.

6.2.4 Learned Authorised Representative of the assessee relied upon the ratio of decision in CIT v. Lavanya Land (P) Ltd. (2017) 297 CTR (Bom) 204 : 2017 TaxPub(DT) 1954 (Bom-HC) wherein it was held that if the entries on loose sheet of papers found during search are not corroborated by any other evidence, no addition can be made. He also relied upon the decision in the case of Sahiiya Housing (P) Ltd. v. Dy. CIT in ITA No. 246/Hyd/2011, dt. 24-1-2014 of “A” Bench. In this case, some entries were found in pen drive on the basis of which addition was made. Hon’ble Hyderabad Bench of Tribunal held that unsubstantiated material found in the pen drive cannot be considered in the hands of the assessee as a conclusive evidence so as to make addition towards unexplained credit. While so holding, it referred to the ratio of decision in the case of CBI v. V.C. Shukla (1998) 3 SCC 410.

6.2.5 Regarding the additions made in assessment years 2009-10 and 2010-11, learned Authorised Representative of the assessee submitted that since addition in those years has been made on the basis of same seized material as has been considered in assessment year 2008-09, the arguments made in respect of assessment year 2008-09 will apply in the appeals of assessment years 2009-10 and 2010-11 also. However, he submitted that in assessment year 2010-11, the ground of appeal of the Revenue involves addition of Rs. 57,63,597 and therefore that year will be covered in “tax effect” as tax in respect of addition disputed in appeal is less than Rs. 20 lakhs and therefore he requested that the appeal of the Revenue of assessment year 2010-11 may be dismissed on account of low tax effect.

  1. We have heard both the parties, perused the material on record and considered the cases cited before us.
  2. The learned counsel of the assessee submitted before us that in assessment year 2008-09, addition of Rs. 10,06,43,054 comprises of two additions, one of Rs. 7,32,98,821 and the other of Rs. 2,73,44,233. The facts relating to both the additions are different and therefore both these additions need to be adjudicated at length. We observe that the addition of Rs. 7,32,98,821 has been made by the assessing officer on the basis of the screenshot of journal entry dt. 4-9-2007 taken from the tally data in the pen drive and the printout of the details of land which has been reproduced by the assessing officer on page Nos. 2 and 3 of the assessment order as table 1. Other than these two materials, there is no other basis for making addition, which is undisputed fact as per record also accepted by the learned Commissioner Departmental Representative. The assessing officer has made addition invoking section 69. As held inCIT v. Naresh Khattar (HUF) (supra) and CIT v. Dinesh Jain HUF (supra), the initial burden is on the Revenue to establish that there is any investment, which has not been recorded in books and in respect which the assessee is not able to give satisfactory explanation to the assessing officer. As rightly contended by learned Authorised Representative of the assessee, neither the journal entry nor the details of land were reproduced in table 1 on page Nos. 2 and 3 of the assessment order to establish that any investment was made by die assessee firm. The journal entry dt. 4-9-2007 is only an accounting entry passed for introducing the land as capital contribution by the partners who purchased the lands and therefore, this cannot be considered as evidence of investment. It is undisputed that neither during search nor during the assessment proceedings, any material was found to show that the amount contained in the journal entry was paid by the assessee firm to anyone at any time. Therefore, only on the basis of journal entry, section 69 could not have been invoked. As regards the details of land given on page Nos. 2 and 3 of assessment order as table 1, it merely contains some details about different lands and it does not contain even a whisper about any investment or payment made by anyone. We observe that the inference has been drawn by the assessing officer only on the basis of the three figures mentioned at the end of the table, on page No. 3 of the assessment order. This, in our considered view, cannot be considered to be evidence of payment/investment. It is undisputed that during search or thereafter during the assessment proceedings, no material was found or brought on record evidencing that the three figures referred to above represent any actual investment/payment by the assessee. As rightly contended by the learned Authorised Representative of the assessee, that the details given in the chart are not evidence of any payment/investment. Since no evidence has been brought on record by the assessing officer and since nothing was found during search establishing any investment/payment made by the assessee, the two evidences relied upon by the assessing officer, on a standalone basis, in our considered view, cannot form basis for invoking section 69. Therefore, we hold that provisions section 69 are not attracted as neither the assessing officer discharged the initial burden cast upon him to prove investment nor any material has been brought on record to this effect.

8.1 A perusal of the journal entry dt. 4-9-2007, which has been one of the basis for addition, shows that through this journal entry, the lands was purchased by the two persons named in the journal entry and was being introduced as their capital contribution in the partnership firm. Since, these journal entries have been relied upon by the assessing officer. Thus, it has remained undisputed that the lands were not purchased by the assessee but by the two persons as named in the journal entry. When the lands were not purchased by the assessee firm, any question of payment of “on money” does not arise in the case of assessee firm. As rightly contended by learned Authorised Representative of the assessee, that all the lands, except one, described in the assessment order on page Nos. 2 and 3, were purchased prior to formation of the assessee firm. We observe that in para 3 of the assessment order, the assessing officer has himself mentioned that the assessee firm was formed on 4-9-2007. As evident from different entries of land given in table 1 in the assessment order, the date of purchase in all the cases, except in one case, falls prior to 4-9-2007. In other words, the seized material itself shows that the lands were purchased prior to formation of the assessee firm, in this background also, we fail to see how any case can be made out of payment of “on money” by the assessee. There is yet another convincing reason that in all the three years under appeal, there were no sales affected by the assessee firm and the business of the assessee firm had not even started, which is also evidenced by the profit & loss account of the three years placed at page Nos. 309, 311 and 337 of the paper book. These profit & loss accounts have remained undisputed by the assessing officer. We are inclined to agree with the argument of learned Authorised Representative of the assessee that when the source of revenue for the assessee was not there, it cannot be perceived that the assessee could have earned any undisclosed income and made any undisclosed investment. In CIT v. Smt. P.K. Noorjahan (supra), on behalf of the Revenue, it was argued that the word “may” in section 69 should be read as “shall” against which Hon’ble Supreme Court observed that it was unable to agree. Hon’ble Supreme Court thereafter held that the use of the word “may” clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income Tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income Tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In that case, the Tribunal held that the discretion had not been properly exercised by the Income Tax Officer and the AAC in taking into account the circumstances in which the assessee was placed. Hon’ble Supreme Court observed that it did not find any error in the said finding recorded by the Tribunal. In Smt. Rajabai B Kadam v. Asstt. CIT (supra) it was found that the assessee, who was a minor, was found carrying cash of Rs. 1,18,500 by the police Department. The assessee thereafter died. In pursuance to the reassessment notice, his mother filed return declaring nil income and she could not explain the money which was recovered from her minor son. Co-ordinate Bench held that there is no material on record to suggest that the minor could earn said money just within a period of 2 months after leaving his school. It was in these facts and circumstances that the addition was held to be not justified, relying upon the decision of Hon’ble Supreme Court in the case of Smt. P.K. Noorjahan (supra). If we apply the ratio of aforesaid two decisions to the facts of the present case, we find that when the source of income/revenue for the assessee was missing in the sense that the business had not even started during all the three years and since during search, nothing was found to establish that the assessee had any undisclosed income from any other source, the discretion vested in the assessing officer should have been exercised in favour of the assessee and the addition should not have been made. We also observe that the assessing officer has not made any enquiry whatsoever from different vendors of the lands and not even from the two persons named in the journal entry, who, as per the journal entry, introduced their lands as capital contribution in the partnership firm. In absence of any enquiry whatsoever, no addition could have been made only on the basis of inference. It is a settled position of law that for making addition under section 69, there has to be some material establishing actual investment and therefore it is not justified to invoke the section merely on the basis of inference.

8.1.1 In view of all the above reasons, we hold that the assessing officer was not justified in making addition of Rs. 7,32,98,821 on account of the lands described on page Nos. 2 and 3 of the assessment order. We, therefore, deem it proper to confirm the findings of learned Commissioner (Appeals) on this issue and hold that he was justified in deleting the addition.

8.2. Next the addition of Rs. 2.73,44,233 comprised in the total addition of Rs. 10,06,43,054, we observe that the addition has been made by the assessing officer on the basis of printout of tally data found in the pen drive seized from the residence of Shri Kishore Atlani. The printout contains details of 32.68 acres of land and the details have been reproduced as table 2 in the assessment order, on page Nos. 4 and 5. We observe that apart from this printout found during search, no other corroborative material in the form of cash book ledger etc. was found during search. A perusal of the details shows that the lands were purchased over a period of three years, from different persons. It is not the case of assessing officer that details of payment of individual lands were also found during search. What is to be noted is, apart from the chart found, no other corroborative evidence was found during search. It is not the case of assessing officer that any books of accounts and other details supporting the entries in the printout were found during search or brought on record during the assessment proceedings. It is not also the case of assessing officer that any other details in respect of different lands like details of payment to the persons etc. were found during search. Although it is stated that tally data was found in the pen drive, corresponding books of accounts in such tally data were not found as there is no reference of any such corroborative books in the assessment order. We agree with the argument of learned Authorised Representative of the assessee that if any unaccounted investment was made in respect of so many lands, from so many persons that too spread over a period of three years, some other corroborative material like account of the parties, details of individual payments etc. must also have been maintained and found during search and in absence of any such corroborative material, the contents of the pen drive/chart does not inspire confidence. It is also worth noting that there is no finding of fact recorded by the assessing officer about any unaccounted assets or unaccounted expenses or excess cash found during search. Considering all the facts, it comes out that apart from the printout in the form of chart, there is no other evidence in support of the addition made by assessing officer and the chart, by itself, does not constitute any material/evidence to establish unaccounted payment. As held by us earlier, for invoking section 69, the initial burden is on the Revenue to establish that any unaccounted investment was made by the assessee. This mandatory requirement of law is missing in the present case and so the addition is not justified.

8.2.1 It is seen that the details of the lands are contained in the printout obtained from the pen drive. When complete details were available with the assessing officer, the assessing officer could have conducted independent enquiry from the vendors, which also does not appear to have been done. On the contrary, the assessee submitted affidavit of two vendors before the assessing officer and the assessing officer did not even cross-examine them to verify the facts. In absence of any cross examination of the deponents of the two affidavits, the contents of the affidavit become conclusive.

8.2.2 While considering the explanation of assessee about the entries in the pen drive being fake, made by one Shri Ajay Atlani, it is noteworthy to consider that no enquiry whatsoever appears to have been conducted either from the said Shri Ajay Atlani or from Shri Kishore Atlani, from whose residence the pen drive was found. The assessee explained the circumstances under which the entries were made in the tally data in the pen drive by Shri Ajay Atlani. All these facts and assertions have remained uncontroverted. The assessee explained some of the contents of the tally data in pen drive to demonstrate that the entries found in pen drive are fake. Before us. during the course of hearing, learned Authorised Representative of the assessee filed a summarised form of his explanation in the form of a chart. The explanation given to the assessing officer was to the effect that some of the entries in the pen drive do not match with the entries in regular books in the sense that in some cases, payments are mentioned to be made in cash in the pen drive while such payments are established to have been made through cheque in the regular books; that land situated at Labhandi is shown to have been sold to one Shri Suresh G. Atlani while actually, the land was sold to one Shri Vijay Kumar Motwani through registered sale deed, copy whereof has been placed at page Nos. 161 to 176 of paper book; that likewise, some entries were found in the pen drive which mentions that the payments were made through Bank of Baroda and State Bank of India, Pandri Tarai Branch while the assessee explained that nobody in the group of assessee had any account in any branch of Bank of Baroda and that the cheque number in respect of payment made through State Bank of India did not relate to any bank account held by the concerned person in that bank and similarly other many discrepancies were pointed out before the assessing officer. All these explanations were rejected by the assessing officer without giving any reason whatsoever. However, for rejecting the explanation of assessee, it was incumbent upon the assessing officer to have given detailed reasons for not accepting the same and in absence of any reason given, we do not approve the action of the assessing officer.

8.2.3 We also find that in the case of another company i.e. Aarti Infrastructure and Buildcon Ltd., addition was made on the basis of pen drive found from the residence of Shri Kishore Atlani. In that case also, explanation was submitted that the entries in the pen drive were fake entries made by Shri Ajay Atlani and the circumstances in which the entries were made in the name of above company were explained to be the same as has been explained in the present case. These assertions of above named the company before this Bench of Tribunal are contained at page No. 16 of Tribunal’s order in the case of above named company, which has been filed in the paper book at page Nos. 350 to 376. The addition made in that case on the basis of entries in the pen drive was deleted by the Commissioner (Appeals) accepting the above explanation of the company. Apart from this, it was also held by the Commissioner (Appeals) in that case that in absence of any corroborative material found during search, the addition was not justified. These findings of Commissioner (Appeals) have been affirmed by this Bench of Tribunal in its Order, dated 15-2-2018. Learned Authorised Representative of the assessee submitted that it is the same pen drive which was found during search, which contained the data relating to Arti Infrastructure and Buildcon Ltd. and relating to various other assessees, including the assessee in the present appeal and this explanation of assessee has remained uncontroverted. Therefore, we find that the subject matter of dispute already stands adjudicated by this Bench of Tribunal wherein the explanation of assessee has been accepted and therefore, we do not find any reason to take a different view from the one taken by this Bench of Tribunal earlier, in the case of Aarti. Infrastructure & Buildcon Ltd., in IT(SS)A No. 30/Rpr/2013 for assessment year 2008-09Order, dated 15-2-2018 wherein the Co-ordinate Bench vide para 23 held as under :–

“23. We find that the undisputed facts of the case are that the assessee company sold its land situated at Mowa to Purandar Promoters and Developers (P) Ltd. vide a registered sale deed dt. 13-3-2008. As per the said sale deed, the consideration for the said land was Rs. 2,95,20,000 only. The stamp duty value of the said land was Rs. 3,68,90,000 at the time of execution of sale deed. Section 43CA was inserted in the statute by the Finance Act 2013 with effect from 1-4-2014 and therefore, not applicable in the assessment year under appeal. Nowhere in the course of search, any agreement for the said sale of land in question for an amount other than Rs. 2,95,20,000 was found. On the basis of excel sheet contained in the pen drive, the assessing officer inferred that the entire amount of Rs. 12,13,11,005 received/receivable from Suncity Project (P) Ltd., was on account of sale of the land at Mowa whereas the explanation of the assessee was that on the basis of inflated and projected value of the land of which development was to be carried out by the assessee and its other associates, the Suncity Project (P) Ltd., agreed to investment Rs. 12,13,11,005 with the assessee and its associates as unsecured loan and share application, etc. for becoming a future partner in the development of the said land. However, this deal could not be materialized and the loan etc. received from Suncity Project (P) Ltd., was returned back to them or adjusted against the land in as it is position. The assessee strongly urged that in no point of time Suncity Project (P) Ltd., or Purandar Promoters and Developers (P) Ltd. agreed to purchase the said land at Rs. 12,13,11,005 and never ever such consideration was received by the assessee. In view of the above explanation, we find no error in the order of the Commissioner (Appeals). In the excel sheet contained in the seized pen drive against the amount of Rs. 12,13,11,005, the word stated was ‘cost’ and not the ‘sale value’ of the land. Even in the agreement dt. 1-4-2006, nowhere it was stated that Rs. 10,33,11,005 receivable from Suncity Project (P) Ltd. was against the sale value of the land in question. The explanation of the assessee that it was the estimated cost after the development of the land against which M/s Suncity Project (P) Ltd. agreed to make the investment but such development never took place cannot be ruled out. Rather that seems to be more plausible as the amounts received from Suncity Project (P) Ltd., were all through banking channel and same were also returned back through banking channel by the recipients of that amount before the date of the search. In the above circumstances, we do not find any good reason to interfere with the order of the Commissioner (Appeals). It is confirmed and the ground of appeal of the Revenue is dismissed.”

8.2.4 The assessee has placed reliance on the decision in the case of CIT v. Lavanya Land (P) Ltd. (supra) and Sahitya Housing (P) Ltd. (supra). In the case of Lavanya Land (P) Ltd. (supra) search under section 132 was conducted and certain incriminating documents were seized from the residence of one person and in the statement recorded, he admitted that the amounts contained in the incriminating material were disbursed for purchase of land. Such statement was subsequently retracted by him. It was held by Hon’ble Bombay High Court that while an entry in regular books is relevant for the purpose of considering the nature and impact of a transaction, noting on slips of paper or loose sheet of papers are required to be supported/corroborated by other evidence. In that case, addition was made on the basis of the seized document but there was no material to prove that huge amount in the seized documents was transferred from one side to another and the revenue did not bring on record a single statement of the vendor of the land. None of the seller was examined to substantiate the claim of revenue that extra cash had actually changed hands. In the case of Sahitya Housing (P) Ltd., some entries were found in a pen drive which pertained to two persons, one of whom accepted the entries and offered for taxation while the other did not do so. It was held that it is not substantiated by any corroborative evidence that the second assessee was involved in the transaction so as to make addition in the hands of the second assessee. In absence of corroborative evidence, the addition was held to be not justified.

8.2.5. In view of that matter, and factual matrix of the case, in our considered opinion, the addition of Rs. 2.73,44,233 made by the assessing officer on account of purchase of 32.68 acres of land merely on the basis of the excel sheet contained in the seized pen drive and entries in loose papers in the seized documents, unsubstantiated with any corroborative evidence, is not justified, which has been rightly deleted by learned Commissioner (Appeals).

  1. Following the Co-ordinate Bench decision in the assessee’s own case, we hold that the entire addition of Rs. 10,06,43,054 made by the assessing officer in assessment year 2008-09 had remained unsubstantiated and uncorroborated and therefore learned Commissioner (Appeals) was justified in deleting the same. We, therefore, do not see any good reason to interfere with the order of the learned Commissioner (Appeals). As such, it is confirmed and the grounds of appeal of the Revenue are rejected.

ITA No. 179/Rpr/2014

  1. InITA No. 179/Rpr/2014 the facts and circumstances of the case are exactly similar to that in ITA No. 178/Rpr/2014. Therefore, our observation and finding in ITA No. 178/Rpr/2014 are squarely applicable to the facts in ITA No. 179/Rpr/2014 in mutatis mutandis. Accordingly, we affirm the Commissioner (Appeals)’s finding in granting relief of Rs. 2,59,57,040 to the assessee firm in respect of assessment year 2009-10, on account of entries found in the pen drive and the printout obtained therefrom, containing details of purchase of 32.68 acres of land and thus, the Revenue’s grounds rejected.

ITA No. 180/Rpr/2014

  1. So far as theITA No. 179/Rpr/2014 of Revenue for assessment year 2010-11 is concerned, it is evident that the tax involved in this appeal is less than Rs. 20 lakhs. Before us, the learned Commissioner-Departmental Representative has fairly agreed that the tax effect in this year is less than Rs. 20 lakhs. We find that the CBDT vide Circular No. 3 dt. 11-7-2018 ((2018) 167 DTR (St) 21 : (2018) 303 CTR (St) 49) has revised the monetary limit for filing the appeal by the Department before the Tribunal Rs. 20 lakhs. There is no dispute that the Board’s Instructions and Circulars issued to the Income Tax authorities are binding in nature on these authorities. Therefore, the Department should have either withdrawn or not pressed the appeal of assessment year 2010-11 in view of the aforesaid instruction, since the tax effect in assessment year 2010-11 is less than 20 lakhs. Therefore, in view of CBDT Circular No. 3 dt. 11-7-2018, the appeal of Revenue for assessment year 2010-11 is hereby dismissed as not maintainable.
  2. In the result, all the three appeals of Revenue are dismissed.

 

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