ORDER
Joginder Pall, A.M.
1. This is bunch of 9 appeals of the Revenue and 9 cross-objections filed by the 9 assessees filed against the respective orders of CIT(A) and for the assessment year mentioned in the caption of this order. Since the issues raised in the Revenue’s appeals and COs filed by the assessees are common and arise from the same orders of CIT(A), the same were heard together and are being disposed of by this consolidated order for the sake of convenience.
2. In the appeals of the Revenue, the following two identical grounds have been raised :
1. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 1,64,000 made by the AO holding the same to be cash available with the assessee as per material available on record in the shape of piece of paper, i.e., p. 4, Annex. IV mentioned in the assessment order, which was found in the course of survey operation under Section 133A of the Act.
2. That the learned CIT(A) has erred in not affording an opportunity to the AO while accepting the additional evidence which is in violation of provisions of Rule 46A of IT Rules.
3. In the cross-objections filed by the assessees, the following two identical grounds have been taken :
1. That the learned CIT(A) has erred in confirming the addition of Rs. 35,000 being 1/9th share of alleged investment in shares out of undisclosed sources.
2. That the learned CIT(A) has erred in not adjudicating the assessee’s ground of appeal that the assessment framed is barred by limitation.
4. The facts of the cases common to all assessees are that these assessees had filed the returns of income in individual cases. The IT authorities had carried out survey action under Section 133A at the business premises of two firms on 7th Sept., 2000 in which family members of these assessees were partners. During the course of survey action certain loose sheets were found. The Revenue obtained the photocopies of the same. The partners of the firms, viz., Achuhat Poddar, vide letter dated nil stated to have been received on 7th Sept., 2000 disclosed on behalf of two firms income of Rs. 10 lakhs each and income of Rs. 10 lakhs in the hands of 10 individual members including the assessees. However, subsequently income disclosed was retracted vide letter dated nil stated to have been received on 15th Sept., 2000, i.e., after a week stating that no discrepancy, whatsoever was found in the stock and cash during the survey proceedings. Regular books have been maintained, which were upto date.
5. Thereafter, the AO took up assessments in all these cases under scrutiny and issued notices under Sections 143(2) and 142(1). Books of account were not produced on the ground that these have not been maintained. The AO referred to one loose sheet listed on p. 4 of Annex. IV, where narration of Ramaya Chit, Arvindra, State Bank was mentioned. He noted amounts of Rs. 20,000 + 40,000 + 20,000 + 8,70,000 and 6,90,000 aggregating to Rs. 16,40,000 were written. On the basis of such entries the AO observed that surrender of Rs. one lakh each had been made in the names of individuals. He, therefore, took share of each of ten persons in Rs. 16,40,000 at Rs. 1,64,000 each and made the addition for the same on the ground that the same was cash available with the assessees.
5.1 Further, the AO referred to page No. 7 of Annex. IV and noted entries recorded on such paper where it was noted “share application”. The AO noted that amount of Rs. 3,15,000 represented investment in shares of 9 assessees. He, therefore, made an addition of Rs. 35,000 each on this account.
6. Being aggrieved, all the assessees filed appeals against the orders of AO before CIT(A). It was argued before the CIT(A) that papers found during the survey were loose sheets which did not represent any specific transactions. Rather these were only rough and casual notings without any dates. There was no mention whether these were receipts or payments. The assessee also stated that figure of Rs. 8,70,000 and Rs. 6,90,000 on p. 4 of Annex. IV represented rates of machines quoted by the machine supplier which was proposed to be purchased. It was also submitted that cash found at the time of survey was just Rs. 15,800. How could it be said that cash available was Rs. 16,40,000 in which share of each individual (sic). It was also argued that amount surrendered at the time of survey was subsequently retracted. It was also argued that none of the names of these assessees appeared on pp. 4 and 7 of Annex. IV and, therefore, the addition was made on the basis of surmises and conjectures. The learned CIT(A) considered these submissions and accepted that there was no basis for making the addition of Rs. 1,64,000 each by relying on p. 4 of Annex. IV. He, therefore, deleted such addition made in all the cases. As regards addition of Rs. 35,000 each made by relying on p. 7 of Annex. IV, the learned CIT(A) upheld the addition by observing that the same was neither rough nor vague because some of these figures appearing in this paper are mentioned against specific individuals/concerns of the family members/concerns of Poddar family. The Revenue is aggrieved by orders of CIT(A) in deleting the additions of Rs. 1,64,000 in each of the cases and assessees are aggrieved by sustaining additions of Rs. 35,000 each in all these cases. Hence, these cross-appeals before me.
7. Arguing the appeals of the Revenue, learned Departmental Representative drew my attention to pp. 1 to 2 of paper book of the assessee which is a copy of assessee’s surrender letter received on 7th Sept., 2000 whereby income of Rs. 10 lacs each was surrendered in the hands of two firms and income of Rs. 10 lacs was surrendered in the hands of 10 individual assessees. He further drew my attention to p. 129 of the same paper book which is assessee’s letter received on 15th Sept., 2000 whereby income surrendered was retracted. He, then referred to the loose sheets of Annex. IV placed at pp. 52 to 89 of paper book which were found from the premises of the two firms during the course of survey action under Section 133A of the Act. He then drew my attention to p. 55 of the paper book which is a copy of p. 4 of Annex. IV which is one of the sheets relied upon by the AO for making an addition of Rs. 1,64,000 each. He submitted that aggregate amount of entries worked out to Rs. 16,40,000 in which each individual’s share worked out to Rs. 1,64,000. He further referred to p. 58 of the paper book which is a copy of p. 7 of Annex. IV relied upon by AO for making an addition of Rs. 35,000 each in the hands of each of 9 assessees. Thus, he submitted that additions made by the AO on the basis of these papers found during the course of survey action of the premises of both the concerns belonging to family members of these assessees should have been upheld by the CIT(A).
8. The learned Authorised Representative, on the other hand, heavily relied on the order of CIT(A) and reiterated the submissions made before the authorities below. He submitted that survey action under Section 133A was not carried out at the premises of these assessees. Such action was carried out at the premises of two firms. Therefore, none of the so-called documents relied upon by the AO for making the additions were found/recovered from these assessees. He further argued that addition of Rs. 1,64,000 each has been made for the reason that cash was available. He submitted that cash actually found was just Rs. 15,800. He, then, drew my attention to p. 4 of Annex. IV of the paper found from the premises of the firms. These are only rough figures/scribbling and do not contain any entries about cash, investment in certain assets. The paper does not show whether these are receipts or expenses and does not contain the name of any of the 9 assessees where additions of Rs. 1,64,000 each have been made. Further, these do not bear any dates. He further stated that the name mentioned on this page is of ‘Sun’ which is a partnership firm in the name of Sun Synthetics. At best, this paper could be said to relate to firm. Therefore, the additions have been made on conjectures and surmises and without any basis. He also submitted that assessments were made in complete absurdity without application of mind. He drew my attention to the relevant paragraphs of assessment orders where AO has repeatedly mentioned that survey action under Section 133A was carried out in these cases whereas such action was carried out only at the premises of firms. He further stated that AO had recorded that assessee had not maintained books of account. But subsequently recorded that books of account were produced and examined. He further submitted that income disclosed during survey was retracted as the surrender was made under duress. The learned CIT(A) has also upheld the contention of assessees that surrender was obtained under duress. He also stated that not even a single paise of unaccounted investment in property, bank, FDRs, NSCs, KVPs, IVPs, deposits, shares, etc. belonging to these 9 assessees was found during the course of survey. Same arguments were advanced in regard to common ground relating to COs filed by the assessees. He drew my attention to p. 7 of Annex. IV (a copy placed at p. 58 of the paper book). He submitted that the names of Pragya Poddar, Achucht Poddar and Surya appear and down below is the name of Sun, i.e., Sun Synthetics, a firm where survey action was carried out. He argued the names of none of the assessees appear on this page. Against these names narration is “share application”. He submitted that assessees had explained before the authorities below that the group wanted to float a new company. This was a tentative proposal of share capital contribution by the persons whose names appeared. But the project did not materialise. However, he submitted that during the course of survey at the premises of two concerns, no share certificates, evidence for share applications submitted, any other investment in the name of any of these persons was found.
Therefore, the learned CIT(A) was not justified in sustaining such addition. He also relied on the following decisions of the Tribunal in support of contentions that no addition can be made by relying on such loose papers which do not contain specific details of income and expenditure :
(i) Tribunal Mumbai Bench in the case of S.P. Goyal v. Dy. CIT ;
(ii) Tribunal Delhi Bench in the case of Atul Kumar Jain v. Dy. CIT (1999) 64 TTJ (Del) 786;
(iii) Tribunal Delhi Bench in the case of S.K. Gupta v. Dy. CIT (1999) 63 TTJ (Del) 532:
(iv) Tribunal Indore Bench in the case of Brijlal Rupchand v. ITO (1991) 40 TTJ (2nd; 668;
(v) Tribunal Pune Bench in the case of Chander Mohan Mehta v. Asstt. CIT (1999) 66 TTJ (Pune) 327;
(vi) Ashwani Kumar v. ITO (1991) 42 TTJ (Del) 644 ; (1991) 39 ITD 183 (Del); and
(vii) Sunder Agencies v. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai).
9. I have heard both the parties in extenso and given my thoughtful consideration to the rival contentions, gone through the evidence, material placed on record and orders of authorities below and referred to relevant pages of paper book to which my attention has been drawn by both the parties. Now the undisputed facts of the case are that survey action under Section 133A was carried out at the business premises of firms and not at the premises of these assessees and loose sheets were found from the premises of firms and not from the assessees. Thus, the onus was on the firms to explain the nature of entries found recorded on these papers. The disclosure made on 7th Sept., 2000 by partner of the firm on behalf of these persons was retracted on 15th Sept., 2000. Therefore, the additions in the hands of assessees could not be made by relying on these disclosures. Now the basis of these additions are two loose papers at page Nos. 4 and 7 of Annex. IV found during the survey action at the premises of the firms. I have minutely examined these papers. None of the name of these assessees appears on these pages. Page No. 4 indicates the name at the top ‘Sun’ which is a partnership firm. If at all these entries are to be considered for addition, it could only be in the hands of firm whose name appeared and from whom the same was recovered. Similarly, p. 7 contains the names of Pragya, Achuhat, Surya and Sun. Surya Synthetics and Sun Synthetics are partnership firms. The names of these persons do not appear on this page also. It is also a fact that cash of Rs. 15,800 was found at the time of survey. Addition of Rs. 1,64,000 each has been made on the basis of cash available. Now the question arises whether the remaining cash was found either by way of entries in books or in reality. These entries do not show whether these were receipts, expenses, investment or unaccounted sales, purchases, etc. Therefore, there is no basis for making an addition of Rs. 1,64,000 in the hands of these assessees when there is neither evidence nor cash found. Further, during the course of survey, no investment in the form of share certificates, NSCs, KVPs or in any other form was found in the names of any of these persons. Under these circumstances I am of the considered opinion that no additions could be made in the hands of these assessees from whom neither these papers were found nor any evidence or material was found indicating their undisclosed income, investment, expenses, etc. The learned CIT(A) was unjustified in upholding addition of Rs. 35,000 each on the basis of page No. 7 of Annex. 4 by observing that details recorded thereon represented entries/investment relating to shares by the family members. As stated earlier, the names of these assessees do not appear on this page. All are separate assessees. Assuming for a while these represent investments by the other family members, how could these be held taxable in the names of these assessees when there is neither entry found in their names nor there is any evidence of these persons having made such investment. No addition could be made merely on assumptions and presumptions. Once the assessee denies such entries, the onus is on the Revenue to establish that the same belong to the assessee and represent undisclosed income/transactions.
10. The various decisions relied upon by the learned Authorised Representative also supports the above view. In the case of S.P. Goyal v. Dy. CIT (supra) it was held that no addition can be made on the basis of entries in the loose sheets found during the search because there was no evidence that these represented unexplained cash credits. In the case of Atul Kumar Jain v. Dy. CIT (supra), addition made to undisclosed income on the basis of uncorroborated chit of paper was deleted because AO had neither examined the assessee nor the author of those entries. In the case of S.K. Gupta v. Dy. CIT (supra), loose sheets and torn papers were seized during the search. Assessee explained that such entries related to some futuristic planning; No corroborative evidence was brought on record to show that purchase and sale of properties had taken place. On these facts, addition made by the AO was deleted. Same view was taken by Indore Bench in the case of Brijlal Rupchand v. ITO (supra). In the case of Chander Mohan Mehta v. Asstt. CIT (supra), the Tribunal observed that loose papers did not indicate the name of assessee. Therefore, loose papers by themselves did not lead to any conclusion and had no evidentiary value. Thus, the sum and substance of these decisions is that entries found on the loose papers without indicating the name of assessee and the nature of entries could not by themselves form the basis of addition until there is some material and evidence on record to corroborate that these represent undisclosed/unaccounted income investment or expenditure. No such material has been placed on record in the present cases. In fact, the cases of these assessees stand on stronger footing because these loose sheets were not recovered from the assessees and the names of these persons did not appear on the same. Therefore, the burden was on the Revenue to establish that these contained undisclosed cash/investment in their hands which Revenue has failed to do.
11. Before parting with this issue, I would also like to refer to the income surrendered during the course of survey which was subsequently retracted and whether any addition could be made merely on the basis of such surrender. From the facts discussed above it is obvious that names of these assessees do not appear on the pages found during the course of survey carried out at the premises of the firms where it was stated that only two of the 9 assessees, viz., Neeru Poddar and Bhawna Poddar were partners. The remaining 7 persons were not even partners in those firms. These two partners had not given any statement or signed the letter admitting income of Rs. one lakh each in the hands of these assessees. It is also a fact that no evidence indicating any unexplained investment, income, expenditure relating to these assessees was found. No other corroborative material and evidence has also been placed on record to justify or support the disclosure. Now the question is whether on the basis of such bald disclosure which also stood retracted, any addition could be made in the hands of these assessees. Similar issue where income was disclosed under Section 132(4) during the search which was subsequently retracted came to be considered by Tribunal, Amritsar (SMC) Bench, in the case of Asstt. CIT v. Anoop Kumar, ITA No. 451/Asr/1998 for the asst. yr. 1993-94 [reported at (2005) 94 TTJ (Asr) 288–Ed.], where it was held that since there was no material available with the Department to justify to support the income disclosed under Section 132(4), retraction was justified. The addition could not be made merely by relying on the statement recorded under Section 132(4) when there was no supportive material to justify such addition. Relevant findings recorded in para 7 of aforesaid order are as under:
“7. I have heard both the parties at length and given my thoughtful consideration to the rival submissions with reference to facts, evidence and material available on record. Now the material question which requires to be decided by this Bench is whether addition made merely by relying on the statement recorded under Section 132(4) without there being any supportive material or evidence to justify such addition could be sustained in appeal. There is no quarrel on the issue that the provisions of Section 132(4) empowers the authorised officer, during the course of search to examine on oath any person and the statement recorded during the course of search and the statement made by such person during such examination may be used in evidence in any proceedings under the Indian IT Act. During the course of recording of such statement, the assessee can also disclose/surrender income which had not been disclosed in the returns of income filed earlier. Clause 2 of Expln. 5 of Section 271(1)(c) confers certain benefits on the person who had made a statement under Sub-section (4) to Section 132 surrendering income which had not been disclosed in the return of income in the form of immunity from penalty under Section 271(1)(c) subject to his disclosing the manner in which such income was derived and the payment of tax and interest in respect of such income. Thus, the income surrendered during the course of recording of statement under Section 132(4) is also for the benefit of the assessee. Now the question arises as to whether the income surrendered during the course of recording of statement under Section 132(4) could be retracted, if there is no material to justify such disclosure. It is not in dispute that income disclosed under Section 132(4) was subsequently retracted by the assessees. It was also not disclosed in the returns of income filed. Based on the seized documents and material, the AO has computed total income, which is below the income disclosed under Section 132(4) of the IT Act. In fact all the additions made by the AO based on the documents and evidence found during the search stand confirmed. It is also a fact that total income so computed by the AO falls below the income disclosed under Section 132(4). It is not the case of the Department that difference in the income assessed and income disclosed under Section 132(4) represent some other concealed income. Therefore, it is clear that there is no material available with the Department to justify the addition so far as the difference between the income computed by the AO and income disclosed under Section 132(4). In other words, the so-called disclosure under Section 132(4) is bald and has no legs to stand and in such a case retraction is justified. The decision of the Tribunal, Jodhpur Bench, in the case of Maheshwari Industries v. Asstt. CIT (supra), Tribunal, Delhi Bench, in the case of R.P. Locks Co. v. Dy. CIT (supra) and the judgment of the Hon’ble Andhra Pradesh High Court in the case of CIT v. Ramdas Motor Transport (supra) support this view. Thus, the view that emerges is that ultimate addition to be made in a case would depend on the facts and circumstances of the case and not purely on the disclosure made under Section 132(4), which also stood, retracted subsequently. There could be a case where income disclosed under Section 132(4) was on the lower side than the income based on material and evidence found during the course of search or post-search enquiry. In such a case, the AO would be fully justified in completing the assessment on higher income, as such additions would be backed by evidence and material on record. The only implication would be that the assessee would not be entitled to immunity from penalty and prosecution in respect of income, which was not disclosed under Section 132(4) of the IT Act. In the light of these facts and circumstances of the case, I am of the considered opinion that no addition could be made merely by relying on the statement recorded under Section 132(4) when there is no evidence or material to justify such addition. The retraction to the extent of difference is fully warranted and justified. Thus, I find no justification to interfere with the impugned orders of the learned CIT(A). The same are upheld. Respective grounds of appeal of the Revenue are dismissed in both the cases.”
The case of the assessees stand on stronger footing. In these cases there was neither search nor survey action carried out at their premises. Income was not disclosed under Section 132(4) of the Act. Moreover, disclosure was not made by these assessees themselves.
12. In the light of detailed discussion in the preceding paragraphs and the legal position discussed above, I am of the considered opinion that the learned CIT(A) was not justified in sustaining the addition of Rs. 35,000 each in the hands of these assessees. However, the orders of CIT(A) in deleting the addition of Rs. 1,64,000 in the hands of these assessees do not warrant any interference. Accordingly, the orders of CIT(A) in regard to deletion of addition of Rs. 1,64,000 each in these cases are upheld and in regard to sustaining an addition of Rs. 35,000 each are set aside and addition made in all the cases is deleted. While the grounds of appeal of the Revenue in all these appeals is dismissed, the grounds of COs of the assessees is allowed.
13. The next common ground of appeal of Revenue in all the cases relates to accepting fresh evidence under Rule 46A. Briefly stated, the facts are that on p. 4 of Annex. IV, there were two entries of Rs. 8,70,000 and 6,90,000. These were included by the AO in aggregate of Rs. 16,40,000 and thereafter allocated 1/10th to each for making an addition of Rs. 1,64,000 being cash available. During the course of appeal proceedings before CIT(A), the assessee explained that figures of Rs. 8,70,000 and 6,90,000 noted on this page represented rates of machines quoted by machine supplier which assessee intended to purchase. The learned CIT(A) has deleted the addition of Rs. 1,64,000 made in the hands of these assessees. The grievance of the Revenue is that while deleting the addition, the learned CIT(A) took into account the explanation of the assessee that these were rates quoted by the supplier of machinery.
This according to Revenue was fresh evidence admitted by the CIT(A) in violation of Rule 46A of the IT Rules.
14. The learned Departmental Representative simply relied on the orders of AO.
15. The learned Authorised Representative, on the other hand, submitted that this ground of appeal of the Revenue has no legs to stand. The assessee had not furnished any fresh evidence. It was only plea taken before the CIT(A). Taking such plea does not amount to furnishing any fresh evidence.
16. Having considered the rival contentions, I find no substance in the ground of appeal of the Revenue. The assessees had only taken the plea before the CIT(A) that entries recorded on p. 4 were only rough notings and amounts of Rs. 8,70,000 and 6,90,000 represented rates quoted by the supplier for purchase of machinery. No fresh evidence was filed by the assessees in support of such plea. Further, the learned CIT(A) has not deleted the addition of Rs. 1,64,000 each by accepting such plea of the assessees. He has deleted the addition for the reason that names of these assessees do not appear on this page and cash found at the time of survey was only Rs. 15,800 and, therefore, the basis of addition that cash of Rs. 1,64,000 was available in the hands of each assessee was wrong and unjustified. I have also upheld the order of CIT(A) for the various reasons discussed above and not for the reason that Rs. 8,70,000 and Rs. 6,90,000, represented rates quoted by the supplier for purchase of machinery. In any case taking a plea before the CIT(A) does not amount to furnishing of fresh evidence. In the light of these facts and circumstances of the case, I confirm the orders of CIT(A) and reject this ground of appeal in all the cases.
17. The last ground of COs of the assessees is that CIT(A) erred in not adjudicating the ground that assessments in these cases were time-barred. This was not argued before me. Even in the written submissions filed, this ground was not covered. Thus, this ground in all COs filed by the assessees is dismissed as such.
18. In the result, all appeals of the Revenue are dismissed and all COs filed by the assessees are allowed.