ORDER
P.N. Parashar, J.M.
1. This appeal has been filed by the assessee against the order of CIT(A), dt. 23rd Feb., 2000 relating to block asst. yrs. 1988-89 to 1997-98.
2. S. K. Garg, the learned counsel for the assessee appeared on behalf of the appellant-assessee, whereas D.K. Srivastava, learned Departmental Representative represented the Department.
3. The assessee took six grounds at the time of filing of the appeal. Through these grounds, the assessee has challenged various additions sustained by the CIT(A). These grounds are elaborate and are argumentative in form and, therefore, it is not considered proper to reproduce the same in this order. However, we shall take the issues and additions involved in these grounds by referring to the grounds of appeal in relation to such issues/additions.
4. The assessee filed a paper book on 11th Feb., 2001, and inside this paper book on pp. 1 and 2 as many as six grounds were taken. Ground No. 1 in the so-called grounds of appeal (as concised) was additional grounds and an application was also kept in the paper book on page No.3 for admitting this additional ground. Vide order dt. 15th Feb., 2001, the additional ground (Ground No. 1) of the concised ground was admitted. This ground runs as under:
“Because the block assessment order dt. 29th Oct., 1999, as has been impugned in the present appeal, stands wholly vitiated because of non-issuance of notice under Section 143(2) and the same is liable to be held as nullity.”.
5. The hearing was concluded on 11th Sept., 2001. The assessee filed another paper book on 14th Sept., 2001. In this paper book also adopting a similar device, a petition containing additional grounds No. 7 to 10 were kept with a prayer that these additional grounds should be dealt with and decided as additional grounds. This application, was decided by the Bench after inviting objections from the Department and after hearing the learned counsel for the assessee as well as the learned senior Departmental Representative. A detailed order dt. 15th Oct., 2001, was passed by the Bench and the prayer for admitting these additional grounds was rejected. The order of the Bench for rejecting the prayer of the assessee has been typed on pp. 9 to 18 of the order sheet. We do not consider it necessary to reproduce the same here.
6. So far as the additional ground No. 1 reproduced above is concerned, both the parties were heard at length. The contention of the learned counsel for the assessee was that the assessment order was invalid, inasmuch as no notice under Section 143(2) was issued to the assessee. To counter this ground of appeal, the Departmental filed paper book on 18th Sept., 2001. In this paper book, a copy of notice under Section 142(1), dt. 26th July, 1999, was Kept. This copy is available at pp. 3 to 5 of the paper book filed by the Department. At p. No.2 of this paper book, the acknowledgment slip is also kept which shows the receipt of notice under Section 143(2) dt. 27th Aug., 1999. A perusal of these documents goes to show that on 26th July, 1999. Pradeep Mehrotra received notice under Section 142(1) on behalf of the assessee. The acknowledgment at page No. 2 of the paper book also goes to show that on behalf of the assessee, notice under Section 143(2) was issued. The Department has also filed photocopy of the order-sheet from 25th Feb., 1999, to 24th Oct., 1999. As seen on perusal of the orders of the concerned officers, Pradeep Mehrotra represented the assessee during the assessment proceedings.
7. Thus, on the basis of the documents filed by the Department and as referred to above, it is established that notice under Section 143(2) was issued by the AO to the assessee and the same was received on behalf of the assessee. Hence, the contention of the assessee taken through additional ground No. 1 to the effect that no notice under Section 143(2) was issued is not found to be correct as the notice was actually issued to the assessee as mentioned above. Hence, additional ground No. 1 taken by the assessee is rejected.
8. So far as the other grounds of appeal taken at the time of filing of the appeal are concerned before dealing with these grounds, we would like to narrate the facts concerning this matter which are as under:
9. The assessee, an individual was running a Dharam Kanta in the name of M/s. Satnam Dharam Kanta and he was earning income from this business. On 7th Oct., 1997, there was search at the residential premises of the assessee. During the course of search, besides cash and jewellery, some incriminating documents were recovered. The AO issued a notice under Section 158BC, dt. 25th Feb., 1999, to the assessee. In compliance to this notice, the assessee filed return disclosing undisclosed income of Rs. 7,04,820 for the block period from asst. yr. 1988-89 to asst. yr. 1998-99 (corresponding to accounting period ending upto 17th Oct., 1997).
10. The AO after considering the investment in the house of the assessee, the loose papers found during the course of search and other relevant material, computed the undisclosed income of the assessee at Rs. 23,10,108. The assessee had surrendered income of Rs.7,04,813 during the course of search and assessment proceedings. Hence, the remaining income (unexplained) was taken at Rs.16,05.395. The year-wise break up of total income, returned income, surrendered income (unexplained) income and total undisclosed income is given below :
Asst. yt.
Total Income
Returned Income
Surrendered Income
Unexplained Income as in
para
Total undisclosed Income
1988-89
31.000
26,000
5,000
5,000
1989-90
25,130
25.130
1990-91
1.22,621
30,890
10,000
81.731 [para 9(iv)]
91.731
1991-92
1.91,510
46,410
1,45,100
1,45.000
1992-93
1.97.145
53,050
83.163
56.287 [para 9(111)1
1.39.450
1993-94
14.21.740
47,740
24.000
13,50,000 (para 8)
13.74.000
1994-95
85.050
41.110
24,000
19,940 |para9(iv)l
43.940
199596
89.800
59,300
30.500
30.500
1996-97
1.10.828
61.960
27.840
39.020 (para 10)
66.868
1997-98
86,638
92.610
92,610
1998-99 lor period to 17-10-97
3,21,009
2,62.600
58,409
3.21.009
28,82,481
3,91,590
7,04,813
16,05,395
23.10,108
11. The assessee challenged various additions and determination of undisclosed income by the AO before the learned CIT(A), who after considering the submission raised by the assessee allowed relief of Rs. 1,22,172 under various heads.
12. In the setting of above background, we proceed to take up various additions sustained by the CIT(A) in the following manner. Grounds Nos. 1.1, 1.2, 1.3, Ground No. 5 & Ground No. 6.1 (1):
13. These grounds are directed against sustenance of addition of Rs. 13,50,000 made on the basis of loose paper (LP-I).
14. During the course of search, at the premises of the assessee, a loose paper on the letter-pad of Baldev Saree Centre was found. This paper was marked as “LP-32” by the search party. A copy of this paper appears at p. 77 of the paper book of the assessee, filed on 11th Feb., 2001 and also on page No. 1 of the paper book filed on 17th July, 2001. The contents and form of this document are being reproduced below :
Baldev Saree Centre, Kanpur Tel. No. Committee 1,00.000 Mangal Singh 7.50.000 25-3-1993 Manna Manjit 5,00.000 29-3-1993
15. The AO has dealt with this paper in para 8, p. 6 of his order. The AO asked the assessee to explain the nature and contents of this document. The ” explanation of the assessee was that the paper was neither connected with him nor with any member of his family. The possession of this document was explained by saying that the paper belongs to Balwant Singh, proprietor of M/s.. Baldev Saree Centre, who used to come to Satnam Singh as his friend and who might have left the paper. The specific reply submitted by the assessee in this regard to the AO, which is contained in his letter available at pages 12 to 15 of the paper book Vol. III, is also being extracted below : “Paper No.2 on the pad of Baldeo Saree Centre is in noway connected with either Sardar Satnam Singh or any of his family members. Sardar Baldeo Singh was the proprietor of M/s. Baideo Saree Centre and used to come to Sardar Satnam Singh as his friend and this paper might have left by him and mixed with other papers of Sardar Satnam Singh and later on was found and seized at the time of search. Sardar Baldeo Singh is the best person to explain the same. Since the paper relates to March, 1993, and for the last many years Sardar Satnam Singh has neither met him nor Sardar Baldeo Singh has referred about this paper, hence it is very difficult for Sardar Satnam Singh to explain the nature of entries of this paper.”
16. The AO, however, held that since the assessee could not support his contention, the deposits entries of Rs. 13,50,000 mentioned on the paper remained unexplained. Accordingly, he treated the amount of Rs.13,50,000 as unexplained income of the assessee from undisclosed resources for the asst. yr. 1993-94, falling in the block period ending on 17th Oct., 1997.
17. In appeal, before the learned CIT(A), the assessee challenged the addition of Rs. 13,50,000. Before him also, the assessee attempted to explain the position in relation to this document. In his written submission made before the learned CIT(A) a copy of which is available at pp 53 to 70 of the paper book of the assessee. Following specific plea was taken :
“From the perusal of the above loose paper, it is obvious that within contents of this paper, there is nothing which could establish its nexus with assessee. The name of assessee is conspicuously missing within it. The mere figures are scribed without indication that same are rupees. The figures together with name (Mangal Singh and Manjit Singh) committee absolutely do not indicate the nature of transaction. It is not in handwriting of assessee. This paper specifically and conspicuously gives the name and address of Baldeo Saree Centre with address. This loose paper ex lade belongs to the person whose name and address is given within it. According to the information of assessee furnished to AO is Sardar Baldeo Singh.
4. In view of the above fact, the assesses has legal onus only to the extent to explain the nature of recovery of this paper from his possession. This onus has been discharged by making his denial of his nexus in any manner with this paper. Baldeo Singh proprietor of concern Baldeo Sari Centre could only explain it. It is reasonable explanation. It is judicially held that an explanation prima facie reasonable cannot be rejected on arbitrary grounds or on mere suspicion or on imaginary or irrelevnt grounds. Reference is made to the following decisions :
(i)R.B.N.J. Naidu v. CIT (1956) 29 ITR 194 (Nag);
(ii)Lalwanti Sial v. CIT (1956) 30 ITR 228 (Nag); and
(iii) Kanpur Steel Co. Ltd. v. CIT (1957) 32 ITR 56 (All).
Once the onus resting on the assessee as above is discharged he cannot further be required to explain the contents of this paper. Onus has shifted to the AO to enquire with Baldeo Singh on address printed on this paper.”
18. On behalf of the assessee, reliance was also place on various decisions including the following :
(i) Dhirajpal Girdhari Lal v. CIT (1954) 26 ITR 726 (SC);
(ii) Dhakeshwari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC);
(iii) Lalchand Bhagat Ambica Ram v. CIT (1959) 37 ITR 288 (SC);
(iv) Umacharan Shaw & Bros. v. CIT (1959) 37 ITR 271 (SC);
(v) Omar Salay Mohd. Sait v. CIT (1939) 37 ITR 151 (SC);
(vi) Rajmohan Saha v. CIT (1964) 52 ITR 231 (Assam);
(vii) United Patel Construction Co. v. CIT (1966) 59 ITR 424 (MP);
(viii) Gopi Nath v. CIT (1955) 28 ITR 753 (All);
(ix) CIT v. R.Y. Durlabhji (1995) 211 ITR 178 (Raj);
(x) CIT v. Rameshwar Singh (1933) 1 ITR 94 (PC);
(xi) Seth Nathu Ram Munna Lal v. CIT (1954) 25 ITR 216 (Nag); and
(xii) CIT v. Chamlal Dhingra (1994) 121 Taxation 273 (All).
19. The learned CIT(A) considered the arguments of the assessee, but rejected the same by assigning various reasons. According to him, even if the paper belonged to M/s. Baldeo Saree Centre, the assessee had to prove it by producing the proprietor of M/s. Baldeo Saree Centre, who could have explained the entries contained therein ad since the assessee could not produce the said proprietor of M/s., Baldeo Saree Centre, nor Balwant Singh, came forward to claim the authorship of the entries on the said paper, the AO was justified in treating the unexplained entries as unexplained and deemed income of the assessee. The learned CIT(A) distinguished the decision of Allahabad High Court in the case of Nathu Ram Premchand v. CIT (1963) 49 ITR 561 (All) on facts and held that the same is not applicable in the case of the assessee. The argument of the assessee that the loose paper is not covered in the definition in the “books of account” was also rejected by the learned CIT(A).
20. Before us, the learned counsel for the assessee, S.K. Garg, submitted that the learned CIT(A) was not justified in rejecting the contention raised before him. According to him, the loose paper (LP 32) did not belong to the assessee and was not in his handwriting. It was pointed out by him that there was no date against the entry of Rs. 1,00,000. It was further pointed out that the term rupees has not been mentioned against the figures written on this paper. The learned counsel repeating the same stand of the assessees taken before the two Departmental authorities contended that the assessee had discharged the onus which lay upon him by denying the authorship of the paper. He also contended that the scope of presumption under Section 132(4A) of the Act is limited one and in any case, the presumption is rebuttable. According to him, merely on the basis of presumption raised under Section 132(4A), no addition could be made against the assessee. The learned counsel vehemently argued that the AO as well as the learned CIT(A) were not justified in holding that burden which lay upon the assessee has not been discharged. According to him, the AO could have himself investigated into the matter. The other contention of the learned counsel was that the loose paper found with the assessee cannot be covered within the definition of the “books of account” or “documents”.
21. In support of his arguments, the learned counsel placed reliance on the following decisions :
(1) Monga Metals (P) Ltd v. Asstt. CIT (2000) 67 TTJ (All) 247;
(2) CIT v. Bedi & Co. (P) Ltd. (1998) 230 ITR 580 (SC);
(3) Agrawal Motors v. Asstt. CIT (2000) 66 TTJ (Jab) 130;
(4) Asstt. CIT v. Shailesh S. Shah (1997) 59 TTJ (Mumbai) 574 : (1997) 63 ITD 153 (Mumbai);
(5) Atul Kumar Jain v. Dy. CIT (1999) 64 TTJ (Del) 786; and
(6) CBI v. V.C. Shukla and Ors. (2998) 2 JT. 172 (SC).
The learned counsel also submitted a brief synopsis on this issue which is part of Vol. III of paper book of the assessee and which is available at pp 1 to 11 in that paper book.
22. The learned senior Departmental Representative D.K. Srivastava, on the other hand, made detailed submissions to support the view and findings recorded by the AO and the learned CIT(A). According to him, the paper undoubtedly, belonged to the assessee. On issue relating to availability of the presumption under Section 132(4A), the contention of the learned senior Departmental Representative was that presumption raised under this provision is a rebuttable presumption, but the assessee failed to rebut the presumption. According to him, even in a case of retracted confession, the confessional statement binds the person making it unless the retraction is based on cogent material, in support of his contention, the learned senior Departmental Representative placed reliance on the decision of Hon’ble Supreme Court of India in the case of Surjit Singh Chhahra v. Union of India AIR 1997 SC 2560. He also placed reliance on the decision of Allahabad High Court in the case of Pushkar Narain Saraf v. CIT (1990) 183 ITR 388 (All).
23. The next submission of the learned senior Departmental Representative was that presumption under Section 132(4A) is (sic not) only available in regard to and in the context of search and seizure and since Chapter XIV-B deals with search cases, the presumption can be raised in assessment proceedings of search case. The learned senior Departmental Representative after referring to the questions of law referred to in the case of Pushkar Narain Saraf (supra), stated that in that case the questions were decided in favour of the Revenue and against the decision (sic) by the Hon’ble Allahabad High Court.
24. On the merits of the addition, the learned senior Departmental Representative submitted that the assessee, when asked to explain the possession of this paper during the course of search, only stated that he will not tell about the transaction recorded on p. 32 LP-I, although a specific question was put to him in relation to the entries. In this regard, the learned senior Departmental Representative invited our attention to the statement of Satnam Singh Chhabra, recorded under Section 132 of the Act on 17th Oct., 1997, a copy of which has been filed by the Department and which is available on pp. 9 to 18 of the paper book of the Department.
25. The learned senior Departmental Representative further pointed out that it was not the stand of the assessee that Balwant Singh was on inimical terms with the assessee or that he could not produce him. According to the learned Sr. Departmental Representative the assessee even failed to file affidavit of Sri Balwant Singh before the AO and, thus could not displace the presumption which was drawn against him.
26. On the nature of the loose paper the submission of the learned senior Departmental Representative was that in view of the provisions contained under Section 158BB, the loose paper found with the assessee was a document. According to him, even under Evidence Act and General Clauses Act, the loose paper is covered within the definition of ‘document’. The learned senior Departmental Representative also pleaded that in view of the statement of the assessee, the AO was not required himself to call Balwant Singh for any further enquiry.
27. In support of his argument, the learned senior Departmental Representative placed reliance on the following decisions :
(a) AIR 1997 SC 2560;
(b) CIT v. S.M.S. Investment Corpn. (P) Ltd. (1994) 207 ITR 364 (Raj);
(c) CIT v. S.M.S. Investment Corpn. (1988) 173 ITR 393 (Raj);
(d) Pradip Chandu Lal Patel v. P.G. Karode and Anr. (1992) 197 ITR 385 (Guj); and
(e) 144 ITR 132 (sic).
28. We have carefully considered the entire material placed before us and the rival submissions. The undisputed fact is that the paper was found and recovered from possession of the assessee. The issue as to whether the document belonged to the assessee and contained deposit entries pertaining to the transactions of deposits relating to the assessee is a disputed issue.
29. Before taking up the disputed issues as mentioned above, we consider it proper to point out certain facts relating to the nature and contents of the document, namely, the loose paper LP-32, Whichever as follows :
(a) The documents relate to March, 1993, as against 2nd and 3rd notings of Rs. 7,60,000 and Rs. 5,00,000 the dates noted are 25th March, 1993, and 29th March, 1993, respectively. The document was found during the course of search which was conducted on 17th Oct., 1997, i.e., after a period of four and a half years.
(b) It could not be ascertained or determined as to in whose writing the notings are made on this paper.
(c) The contents of transactions recorded in this paper have not been independently connected or co-related with any transaction relating to the assessee.
(d) The document is on the letterpad of Baldeo Satee Centre, 51/10 K.K. Garg Market, Ramganj, Naughra, Kanpur” but none relating to that concern of firm was produced or appeared to verify the handwriting and contents of the documents.
In view of the above-mentioned aspects relating to the loose paper, we proceed to consider the issue relating to its evidentiary value against the assessee.
30. It may be pointed out that the AO as well as the learned CIT(A) have fastened the entire liability on the assessee only on the ground that the loose paper mentioned above, was recovered from him and he failed to. produce Balwant Singh, proprietor of the firm, namely, “Baldeo Saree Centre” on whose letterhead the notings have been made. In our considered view, in the context of peculair features of this document noted above and the relevant circumstances, the findings of the Departmental authorities in making addition of Rs. 13,50,000 on the basis of jottings in this loose paper are neither legally sustainable nor factually maintainable, because the Departmental authorities have failed to consider relevant factual and legal aspects properly while considering the evidentiary value of this document. We are, therefore, unable to uphold the findings of learned CIT(A) on this issue. In support of this view, we assign the following reasons :
(1) As pointed out above, the document i.e., the loose paper was found in the premises of the assessee during search which took place after more than four and a half years. The assessee was confronted with this document in his statement recorded under Section 132(4) on the date of search. He could not be able to tell about the contents of this paper and stated that he will tell about it later on. Thus, he did not own this paper during the course of search.
(2) The conduct of the assessee is not being able to give a categorical reply can only be treated to be a natural and probable conduct in the circumstances in which the assessee was placed. The failing and fallings of human memory are commonly known. Hence, if the assessee failed to give reply to the question relating to this document, at the time of search, then such conduct of the assessee could not be taken to be deliberate or evasive for concealing the truth because nobody can be expected to connect Such a past even of four years back if asked abruptly as human memory has its shortcoming. The assessee, later on disclosed that the paper belongs to Balwant Singh, the proprietor of Baldeo Saree Centre. According to the assessee, Balwant Singh, who was on friendly terms with him, might have left this paper at his place. In view of this version, the veracity of the statement could have been ascertained by making enquiry as to whether there existed any concern in the name and style of Baldeo Saree Centre and as to whether Balwant Singh was its proprietor or not. This enquiry could have been conducted by the AO himself even if the assessee was not able to establish these facts.
(3) It is true that the assessee could not produce Balwant Singh to whom the loose paper according to him belonged. However, on account of his non-production, the liability of the assessee has been wrongly fixed by the AO. It may be pointed out that under the circumstances pertaining to this matter, it was quite possible in natural way that Balwant Singh might have not agreed to appear before the AO just with a view to avoid apprehended harassment by the Departmental authorities. There may be a strong reason for this avoidance on the part of Balwant Singh, if the paper really belonged to him, because had he owned the paper, then he could have been made liable on the basis of jottings on this paper. Under such circumstances the helplessness and failure of the assessee in producing him before the AO, should have been viewed. However, after clear denial of the assessee recording the authorship of the document and his categoric version that the paper belongs to Balwant Singh, it was incumbent on the part of the AO, who was a quasi-judicial functionary to have himself enquired into this matter by summoning the said Balwant Singh.
(4) It may also be pointed out that by virtue of Section 131 of the Act, the ITO had sufficient powers to summon any person and to enforce his attendance. Section 131 of IT Act, empowers IT authorities with the same powers which are available to the civil Courts. The procedure for summoning witnesses, etc. is laid down under Order XVI of CPC. Rule 14 of this order lays down the following procedure for summoning a witness by a Court suo motu :
“14. Court may of its own accord summon as witnesses strangers to suit–Subject to the provisions of this Code as to attendance and appearance and to any law for the time being in force, where the Court at any time thinks it necessary (to examine any person, including to party to the suit) and not called as a witness by a party to the suit, the Court may, of its own motion, cause such person to be summoned as a witness to give evidence, or to produce any document in his possession on a day to be appointed, and may examine him as a witness or require him to produce such document.”
The AO could have taken resort to the above process for summoning Balwant Singh. Not only this, even cocercive process as laid down in Rule 10 of Order XVI of CPC could have been adopted.
(5) The facts relating to the document were prominent and positive. On the pad the telephone No.(246760) was noted. The AO could have checked and verified these facts just by making a call on this phone. He did not do so. The address of Baldeo Saree Centre was clearly written on the paper, which is as under :
51/60 K.K.Garg Market,
Ramganj, Naughra,
Kanpur-208001.
The AO could have sent an inspector or any of the employee of the Department or could have gone himself to verify the address and the name of the firm on this address, he did not prefer to do even that. The firm, namely. Baldeo Saree Centre might be an assessee, hence inquiry in respect of this firm could have been made by the AO from the concerned ITO also.
(6) The conclusion of the AO that the figures noted on the loose papers disclosed the deposits by the assessee is not conclusively established, because the term “Jama” only has been mentioned. The so-called entries are not referable to any admitted or proved transaction of deposits. Dates against the figures reveal that these have been made either in different hand or on different occasions. Since the document was not sealed after its seizure and was kept in the custody of the Departmental authorities the chances of subsequent notings as pointed out by the assessee in his written submissions, cannot be ruled out. In any case, the loose paper and entries contained therein do not go to prove that these relate to undisclosed income of the assessee. (7) In view of the peculiar facts of this matter and particularly after the discharge of onus by the assessee which lay upon him to explain the contents of this documents, the AO was under a legal obligation either to corroborate the contents of this documents with the transactions of the assessee by independent material or by occular or documentary testimony or connect this paper with the proprietor of Baldeo Saree Centre, The AO only asked the assessee to produce Balwant Singh and on his inability to do so, he closed the matter and fastened liability on him. It may be pointed out that it could not be proved or established that the document was in the handwriting of the assessee or any member of his family or any employee of his firm. The handwriting of the assessee or any member of his family or employee of his firm was not got compared through an expert or otherwise from the handwriting on this document. No connection or link between the assessee and the parties and persons named in the document could be established i.e., it could not be shown that the assessee has made deposits in the name of party and persons mentioned in this document. In fact, the contents of this document could not be linked or correlated with the assessee in any manner. Hence, the mere possession of this document in view of the information printed on the pad of Baldeo Saree Centre and in view of the categoric denial of the assessee about its authorship and about the transaction noted therein, was not sufficient to fasten the liability on the assessee.
31. The mam argument of the learned senior Departmental Representative was that the document was found in the possession of the assessee and there was presumption under Sub-section (4A) of Section 38 (sic-132) of IT Act, according to which it shall be presumed that the books of account or article found in possession of the assessee belonged to him. The learned senior Departmental Representative placing reliance on the decision of Gujarat High Court in the case of Pradeep Chandulal Patel v. P.O. Karode and Ors. (supra), submitted that in view of the presumption laid down under Section 132(4A), the assessee shall be deemed to be the author of these documents. On this point, the learned senior Departmental Representative also placed reliance on the decision of Rajasthan High Court in the case of CIT v. S.M Investment Corpn. (supra), and the decision of Rajasthan High Court in the case of CIT v., Investment Corpn. (P) Ltd. (supra).
32. We have considered the case laws cited by the learned senior Departmental Representative so far as the case of Pradeep Chandulal Patel (supra) is concerned, in that case, the Hon’ble Gujarat High Court has held that the presumption under Section 132(4A) may be raised that the books of account, etc. belonged to the person in whose possession, they were found. The Hon’ble Court has further observed that further presumption about the contents of such books of account being true and that the signature and other parts of such books of account or other document, which purported to be in the handwriting of any particular person or which may reasonably be assumed to have been signed or to be in the handwriting of any particular person, or in that person’s handwriting. It may also be pointed out that the case of Pradeep Chandulal Patel related to penalty matter and the facts of that case are distinguishable from the facts of the present case. So far as the case of S.MS. Investment Corporation (supra), is concerned, the Hon’ble High Court observed in that case that the seizure of the documents from the premises of the assessee raises a presumption, but even assuming that such a presumption arose, the same was a rebuttable presumption relating to a question of fact. So far as the present case is concerned, the assessee had rebutted the presumption by categorically pointing out that the loose papers seized from the premises related to the proprietor of M/s. Baldeo Saree Centre, on whose pad, the notings were made and after this, the burden shifted to be Revenue.
33. In the case of S.M.S. Investment Corporation (supra), also, the Hon’ble Rajasthan High Court held that the presumption under Section 132(4A) of the Act is a rebuttable presumption.
34. The issue relating to the scope of presumption under Section 132(4) came for consideration before the Hon’ble Allahabad High Court in the case of Pushkar Narain Saraf v. CIT (supra). In that case, the Hon’ble Allahabad High Court has held that the presumption arising under Section 132(4A) is available only in regard to and in the context of search and seizure and applies only in relation to provisional adjudication, which is contemplated under Sub-section (5) of Section 132. The relevant observations of the Hon’ble High Court are being extracted below : “The upshot of the foregoing discussion is that the presumption arising under Section 132(4A) does not override or exclude Section 68, that is, it does not obviate the necessity to establish by independent evidence the genuineness of the cash credits under Section 68. Further, the presumption under Section 132(4A) is available only in regard to the proceedings for search and seizure and for the purpose of retaining the assets under Sub-section (5) of the Section 132 and their application under Section 132B of the Act. The presumption is relevant and limited only to the summary adjudication contemplated under Sub-section (5) of Section 132 more nor less.”
35. The learned senior Departmental Representative also placed reliance on the decision of Hon’ble Allahabad High Court and submitted that in that case, the question referred to the Hon’ble High Court was decided in favour of the Department. The learned senior Departmental Representative further submitted that in view of that decision, the assessee is not relieved from the burden of discharging burden which is upon him. After considering the ratio of the decision of Pushkar Narain Saraf (supra), we are of view that the presumption has got a limited scope and is a rebuttable presumption.
36. So far as the point relating to onus and shifting of onus is concerned, it may be pointed out that after the rebuttal of the presumption, heavy onus lies on the Revenue to prove the nature and contents of the documents. In the case of Monga Metals (P) Ltd v. Asstt. CIT (supra), it was held that it was Revenue’s onus first to prove that the arithmetical figure appearing on loose papers were receipts, were in the nature of sale of ingots and amounted to undisclosed income in the assessee’s hands. In the case of Agrawal Motors, vs. Asstt. CIT (supra) (Jabalpur Bench of Tribunal), it was held that the registers found at the premises of the assessee during the course of search containing names of commission agents shall be presumed to be belonging to commission agents and not to the assessee and addition cannot be made on the ground that the assessee made payment to the bank officials for sanction of loans. In the case of Asstt. CIT v. Shailesh S. Shah (supra) (at p. 164), the Tribunal Mumbai Bench after referring to various decisions held, that it is a Revenue’s onus, before assessing any receipt as taxable income; to prove that the receipt in the hands of the recipient is income and this can be proved or established only on the basis of some material or evidence. In support of this conclusion, reliance was placed by the Mumbai Bench of Tribunal on the following decisions :
(1) Lalchand Gopaldas v. CIT (1963) 48 ITR 324 (All);
(2) Addl. CIT v. Netar Krishna Sehgals (P) Ltd. (1983) 141 ITR 681 (Del); and
(3) Bedi & Co. (P) Ltd. v. CIT (1983) 144 ITR 352 (Kar).
37. It may be pointed out that the decision of Kerala High Court in the case of Bedi & Co. (supra) was upheld by the Hon’ble Supreme Court of India in the case of CIT v. Bedi (supra).
38. The real crux of the issue is as to whether the uncorroborated loose paper can be taken as a sole basis for the determination ol undisclosed income. Learned CIT(A) has observed on p. 6 of his order that since the loose paper is covered within the definition of other material or information, undisclosed income can be determined on the basis of such loose papers in view of the provisions contained under Section 158BB. This view is also supported by the learned senior Departmental Representative. On the other hand, the contention of the assessee is that the loose paper found in possession of the assessee is not covered within the definition of books of account or document. The definition of books of accounts of account was considered in the case of CBI v. V.C. Shukla and Ors. (supra). In that case, the Hon’ble Supreme Court of India, observed that to make an entry relevant under Section 34 of Evidence Act, it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. The Hon’ble Court has further observed that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still the statement made therein, shall not alone be sufficient evidence to charge any person with liability. The Hon’ble Supreme Court has further held that without independent evidence, the entries in the books of account cannot foist liability of a person.
39. The issue relating to evidentiary value of jottings on loose papers and the seized dairy come up for consideration before Delhi Bench of Tribunal in the case of Virinder Bhatia v. Dy. CIT ITA No. 5722 to 5725/Del/1996 vide its order dt. 5th May, 2000, [reported at (2002) 74 TTJ (Del) 60–Ed.] the Bench made the following observations :
“The jottings in the seized diary must be considered in the light of the provisions of Section 158B(b) and 158BB. There is no scope for making addition on estimate on conjecture and surmises in block assessment. There must be material/evidence in possession of the AO to support the additions. The jottings in the seized diary must be interpreted in logical and realistic manner, after due consideration of the books of account, agreements/deeds and any other evidence and after examining the concerned parties and confronting the assessee to their statements and report of the Income-tax Inspector, etc. It would be wrong to make interpretation of the jottings in the seized diary in complete isolation of other material evidence etc. such interpretation in isolation may not stand the test of appeal. In the interest of justice and fairplay and in order to arrive at the fair and just conclusions, both the parties must play their role and discharge their respective duties, responsibility and adequately. The assessee must co-operate with the AO to explain the jottings in the seized diary and furnish supporting evidence to meet fair and just conclusion.”
40. In the case of Atul Kumar Jain (supra) the Delhi Bench of Tribunal also considered this issue in detail. After referring various decisions, the Bench made following observations :
“6.6 If we consider the said piece of paper seized during search in light of the definition of the word “document” as given in the Indian Evidence Act and General Clauses Act and truthfulness of the contents thereof in light of the aforecited decisions of the Hon’ble Supreme Court, we find that the said paper contains jottings of certain figures by the same does not describe or express the substance of any transaction and even if the said paper has been seized from the possession of the assessee the contents thereof are not capable of describing the transactions the way the AO has deciphered them without support of corroborative evidence of the parties attributed to the alleged transaction. The said paper, therefore, does not come within the compass of the definition of the word “document” to be used as an evidence. The paper seized, therefore, has no evidentiary value and accordingly the same cannot form the basis for assessing the undisclosed income.”
41. In that case, following the decision of V.C. Shukla (supra), it was also held that seized paper which were not proved to be written by the assessee does not fall within the compass of the meaning of books of account having credibility of its acceptance without support of corroborative evidence.
42. In the case of Dy. CIT v. Karodilal Agrawal, (1994) 50 TTJ (Jab) 393, the Jabalpur Bench of Tribunal held that the jottings in diary neither represented books of account nor any document and, therefore, presumption under Section 132(4A) was not available and addition made on the basis of jottings was deleted.
43. In the case of Mohd. Yusuf and Anr. v. D and Anr. AIR 1968 Bom 112, the Hon’ble Supreme Court of India has observed that the evidence of the contents contained in document is hearsay evidence unless the writer thereof is examined before the Court.
44. In view of the above-mentioned factual and legal position, we are of the considered view that the addition made by raising presumption under Section 132(4A) of IT Act, in the present case, cannot be sustained. Hence, we delete the addition of Rs. 13,50,000. Ground No.1 stands allowed in favour of the assesses.
Ground Nos. 3.1 & 3.2
45. These grounds are directed against the sustenance of addition of Rs. 30,000 on account of unexplained cash found with the assessee.
46. It may be pointed out that during the course of search, cash to the tune of Rs.2,63,330 was found. So far as the cash of Rs.30,000 is concerned, in his statement recorded under Section 132(4) at the time of search, the assessee explained that this sum was out of withdrawal from bank account. Later on, the version of the assessee was that this cash was owned by HUF of the assessee viz., Satnam Singh HUF. On behalf of the assessee, it was submitted that this amount has been shown in the cash flow statement of Satnam Singh HUF in asst. yr. 1996-97, it was also submitted that the said HUF has also filed returns of income for asst. yrs. 1996-97,1997-98 and 1998-99. The AO did not accept the version of the assessee and held that the cash of Rs.30,000 was unexplained income of the assessee. The learned CIT(A) also upheld the findings of the AO.
47. Before us, the learned counsel for the assessee, S.K. Garg, repeated the argument made by the assessee before the AO and the Departmental authorities. He also made reference to the decision of Supreme Court of India in the case of Ananth Ram Veera Singhaniah & Co. v. CIT (1980) 123 ITR 457 (SC). On the other hand, the learned senior Departmental Representative placed reliance on the order of the CIT(A). According to him, the assessee, subsequently made improvement. The learned senior Departmental Representative also submitted that the assessment of HUF was completed under Section 143(1) of the Act and after the date of search.
48. We have carefully considered the facts and circumstances relating to this addition. The assessee explained the availability of the cash in his statement under Section 132(4). If this cash related to HUF, then the assessee who himself was Karta of HUF could have stated in his statement that the cash belonged to HUF. The assessee, on the other hand, disclosed other sources, viz., the withdrawal, from the bank account and when this explanation could not be substantiated, he shifted the stand. Merely because the HUF filed returns of income subsequently, shall not, in our opinion, explain the cash to be belonging to HUF because the first statement has to be treated to be a natural and correct statement and the retraction thereof subsequently cannot be accepted unless the subsequent statement is fully corroborated by very solid and cogent material, which is lacking here. Hence, we uphold the findings of the CIT(A) and reject the grounds taken by the assessee. Grounds No. 2.5, 6.1(ii)
49. These grounds are directed against the upholding of disallowance of deduction of Rs. 28,500 out of capital gains.
50. The learned counsel for the assessee submitted that since the assessee had disclosed the transaction relating to transfer of land, the capital gain cannot be treated to be undisclosed. The AO considered the claim of the assessee about the receipt of Rs. 3.25 lakhs on account of sale of share in property No. 87/156, Acharya Nagar, Kanpur. Since the assessee could not produce any evidence in respect of Rs. 15,000 being spent on brokerage and Rs. 8,500 spent on map approval, the claim of the assessee was rejected by the AO.
51. A perusal of the order of the CIT(A) goes to show that the disallowance was also challenged before the CIT(A), who has duly considered the entire aspect. In our view, the findings of the CIT(A) calls for no interference. Hence these grounds are rejected. Ground Nos. 4.1, 4.2, 4.3, 4.4, 5 & 6.1(iv) :
52. These grounds are directed against disallowance of deduction of Rs. 41,310 + Rs. 13,770.
53. The assessee constructed property at 147 Safipur, Kanpur. The assessee filed valuation report. The approved valuer claimed 36 per cent deduction for various items on total cost of construction. After considering the relevant material as also the rates of CPWD and PWD the AO rejected the claim of the assessee. However, in appeal, the learned CIT(A) held that the deduction @ 20 per cent instead of 36 per cent claimed by the assessee will be reasonable. On this basis, the learned CIT(A) gave relief of Rs. 36,553. Before us, the learned counsel for the assessee submitted that the entire deduction should have been allowed by the learned CIT(A).
54. We have carefully considered the entire matter. Since the assessee did not furnish full details, in support of his claim, the learned CIT(A) was justified in restricting the deduction at 20 per cent we, therefore, do not find any scope to interfere.
55. So far as the amount of Rs. 13,770 is concerned, the assessee claimed deduction @ 5 per cent towards saving any cost on material purchased from sources. Since no evidence was furnished by the assessee in this regard, the total excess deduction claimed by the assessee as per approved valuer’s report was disallowed. The learned CIT(A) also upheld this disallowance.
56. We have carefully considered the entire matter. It is common experience that while purchasing material, efforts are made to save some portion of price by bargain, influence or by exercising relation and personal contacts. The amount claimed at 50 per cent cannot be treated to be excessive. Hence, deduction should have been allowed in our view. The Departmental authorities have not taken a reasonable view in this regard. We, therefore, allow the deduction of Rs. 13,770 and the assessee gets relief accordingly. This ground is partly allowed.
57. In the result, the appeal is partly allowed.