1. As the above appeals are interrelated and involve common points, so we are disposing them of by this common order for the sake of convenience.
2. ITA Nos. 196/Del/2002 to 200/Del/2002 are appeals by the assessee for asst. yrs. 1990-91 to 1994-95, respectively, and are directed against the order of CIT(A), New Delhi, dt. 7th Dec., 2001, in the case of assessee Shri J.R.C. Bhandari.
3. ITA Nos. 189/Jdpr/1999 is an appeal by the Revenue for asst. yr.
1994-95 in the case of assessee Shri Swaroop Chand Sethi and is directed against the order of CIT(A), Udaipur, dt. 16th Dec., 1998.
4. CO. No. 112/Jdpr/1999 has been preferred by assessee-respondent in respect of Revenue's appeal No. 189/Jdpr/1999.
5. We have heard the arguments of both the sides and also perused the record.
6. First we take up ITA Nos. 196 to 200/Del/2002 in the case of assessee Shri J.R.C. Bhandari. All these five appeals are of assessee.
Ground Nos. 1 to 3 in all the above five appeals are common which contain single issue disputing the addition of Rs. 1,94,100 in each of the five assessment years under consideration. The learned authorised representative of assessee has made his oral arguments and has also furnished his written submissions. He has contended that in the first round the issue was set aside by learned CIT(A) to AO vide his appellate order dt. 31st March, 1998 (pp. 6 to 9 of PB), with specific directions. He has contended that thereafter the AO made assessment order on 28th March, 2001 whereby he repeated the additions made by his predecessor without carrying out the main directions of the learned CIT(A) given in his appellate order dt. 31st March, 1998. He has contended that now the assessee is in second round before the Tribunal against the impugned order of learned CIT(A), dt. 7th Dec., 2001, whereby he sustained the aforesaid additions. The learned authorised representative of assessee has contended that on 16th Dec., 1993, search under Section 132(1) was conducted against J.K. Industries Ltd. and consequential searches were also carried out against various employees of the company M/s J.K. Industries (for short, JKI) on the same day; and assessee, being a senior executive of JKI, he was also subjected to search on 16th Dec., 1993. It has been contended that during the course of search at the residence of the assessee-appellant no incriminating document/paper was found, nor any unrecorded assets/investments/expenditure were found. It has also been contended that no addition in respect of any investment was made in any of the asst. yrs. involved. It has been contended that during search in the case of Shri A.K. Chajjer, an employee of JKI, certain loose papers were found and seized. He has contended that out of such loose sheets the Department has used one sheet, being p. 71 of Annexure A-1 (on p.
17 of PB), against assessee. He has contended that on the basis of the said loose sheet A-1/71, found at the residence of Shri A.K. Chajjer, an employee of JKI, the Department alleged that certain additional amounts were paid to various employees of the company in addition to their regular salaries. He has contended that accordingly on the basis of notings on the said loose sheet, the AO reopened the assessment of assessee for asst. yrs. 1990-91 to 1992-93 and that assessments for asst. yrs. 1993-94 and 1994-95 were pending on the date of search. He has contended that on the basis of notings on the said loose sheet, the AO made addition of Rs. 1,94,000 in each of the five assessment years from asst. yr. 1990-91 to 1994-95 just on the basis of surmises and suspicion. He has contended that the learned CIT(A)'s appellate order dt. 31st March, 1998, passed in the first round contained the specific directions that (i) the AO should furnish a copy of the reasons recorded for reopening assessment, (ii) to furnish a copy of the seized documents relied upon by AO against assessee, (iii) to furnish a copy of the statement of Shri A.K. Chajjer, if recorded, and (iv) to allow the assessee, if requested by him, an opportunity to cross-examine Shri A,K. Chajjer. He has contended that the learned CIT(A), in the second round, confirmed the addition without considering the assessee's submission. He has contended that the contention of the AO, as approved by CIT(A), that the accounts maintained by Shri A.K. Chajjer are meticulous and contained details of various payments on behalf of assessee-company along with details regarding nature of payment and time from which same being effective, is not based on any accounts or diaries found or seized from the possession of Shri A.K. Chajjer. He has contended that the addition made in the hands of assessee is based on the basis of loose sheet A-1/71 (p. 17 of PB), which nowhere suggests any payments to the assessee or to any of the executives listed on the said paper. He has contended that there is no evidence on record to show that the amount mentioned in the loose sheet was actually paid to the assessee or any other persons. It has also been contended that the Department has dropped reopened proceedings under Section 147 in a number of cases in which the reassessment proceedings under Section 147 were initiated on the basis of this very loose sheet.
It has been contended that the said loose sheet does not suggest that any such payment was made. It has been contended that there are no corroborative evidence/vouchers, nor signatures of the persons alleged to have received such payments. It has been contended that from the loose sheet it cannot be inferred that the persons named therein have received payments of the amounts. He has contended that the AO has alleged in his orders about the diaries, but no such diaries have been mentioned in the assessment order or in the appellate order, nor any copy of such diaries has been provided to the assessee either at the original assessment proceedings or during the set aside assessment proceedings.
7. The learned authorised representative of assessee has contended that it is settled law that the burden lay on the Department to prove by positive evidence that the amount mentioned in the loose sheet was really received by the appellant. He has contended that there is no evidence to prove the contents of the paper found from the possession of the third party (Shri A.K. Chajjer). He has contended that no incriminating document/asset was found at the residence of assessee to support the receipt of Rs. 1,94,100 in each of the five years, in total a sum of Rs. 9,70,500, and that the entire amount of Rs. 9,70,500 could not have been used by assessee in household expenses nor is there any evidence of such expenditure in spite of the search.
8. The learned authorised representative of assessee has contended that the learned CIT(A), while ignoring the judgment of Hon'ble Delhi High Court in the case of L.K. Advani, observed that the Indian Evidence Act is not applicable to proceedings under the IT Act which is not correct inasmuch as the broad principles of Evidence Act do apply in the proceedings under IT Act and the same have been applied by Hon'ble Supreme Court, High Courts and Tribunals. It has been contended that the said principles have been applied by various Tribunals including in the cases of (a) Unique Organization v. Dy. CIT (2001) 70 TTJ (AM) 131 (b) Pratanna Construction v. Dy. CIT (2001) 70 TTJ (And) 122 (c) T.S.Venkatesan v. Asstt. CIT (2000) 69 TTJ (Cal) 66 : (2000) 74 ITD 298 (Cal), and that in the aforesaid cases the decision of Hon'ble Supreme Court in the case of CBI v. V.C. Shukla 3 SCC 410 has been followed while dealing with evidentiary value of loose sheet on the basis of which tax liability is fastened on the assessee.
9. The learned authorised representative of assessee has contended that the learned CIT(A) has observed regarding cash of Rs. 1.2 crores seized from the premises of Shri A.K. Chajjer, but the same is of no consequence against assessee as there is not an iota of evidence that the said cash seized is linked with the payments alleged to have been made to the assessee; no nexus between the seized paper and cash was established.
10. He has contended that the learned CIT(A) has observed that as regards the failure of AO to record the statements of Shri A.K. Chajjer and to allow the right of examination to the appellant it is on record that he is absconding. He has contended that the learned CIT(A) has not relied on the testimony of Shri A.K. Chajjer but has based this addition on documentary evidence, and that if assessee wanted to rely on Mr. A.K. Chajjer's testimony, he should have brought Shri A.K.Chajjer before AO. It has been contended that it is clear from the cited judgment that no addition could have been made/sustained on the basis of loose sheet found from the possession of third party (Shri A.K. Chajjer), the contents of which have not been proved by independent oral/documentary evidence; and that it is wrong on the part of learned CIT(A) to disregard the ratio of cited decisions and, in particular, the decision of Hon'ble Supreme Court in the case of CBI v.V.C. Shukla (supra). It has been contended that the very basis of addition being the paper (p. 17 of PB), alleged to have been found from the possession of Shri A.K. Chajjer, but there being no explanation nor statement of Shri A.K. Chajjer with respect to the contents noted on the paper, no inference be drawn on the basis of such paper.
11. It has been contended that entries in the books of accounts are not conclusive and the case of Kedarnath Jute Manufacturing Ltd v. CIT (1971) 82 ITR 363 (SC) has been cited in support. The learned authorised representative of assessee has also relied on the decision of Calcutta Tribunal in the case of T.S. Venkatesan v. Asstt. CIT.12. He has contended that the learned CIT(A)'s observation that if the assessee-appellarit wanted to rely on Shri Chajjer's testimony, then he should have produced before AO is against the provision of law inasmuch as the burden to prove that the entries recorded in the loose sheet are true and correct, lies on the Department and not on the assessee and that the learned CIT(A) could not shift the burden from the Department to assessee to produce Shri A.K. Chajjer before AO.13. He has contended that the next contention of learned CIT(A) has been that the low withdrawals are not the primary ground for making these additions. In this regard, he has contended that the household expenses claimed by assessee were adequate and that as a result of search no evidence was found to suggest any expenditure over and above that shown by the assessee. He has contended that the learned CIT(A) has ignored the affidavit given by Shri Mehta, general manager of JKI observing that Shri Mehta has no locus standi in the matter for the reason that Shri Mehta has testified to what he has found on the regular records of the company; and that the dispute involved in respect of those payments which are not on the regular records of the company. He has contended that if the Department wants to assess on the basis of loose sheet obtained from third person, then the burden lies on the Department to prove the same by positive evidence as also the fact that the assessee has received the said amount. He has contended that in spite of search, no unexplained assets nor expenditure were found, and this nullifies the contention of the Department about the earning of income of about Rs. 10 lakhs in five years by assessee, and that no such presumption of extra income can be drawn. In this regard, he has relied on the following decisions : 3. Smt Purnima Beri v. Dy. CIT (2002) 76 TTJ (AST) 467 : (2002) 82 ITD 137 (Asr); 6. Associated Stone Industries (Kota) Ltd. v. Dy. CIT (1999) 64 TTJ (Jp) 708 : (1999) 68 ITD 312 (Jp); 14. As against the above, the learned Departmental Representative of Revenue has contended that the of the employer JKI has been to make additional payments over and above the regular salary, recorded in the regular books of accounts. It has been contended that it was during the search conducted on 16th Dec., 1993, that certain loose sheets were found from the possession of Shri A.K. Ghajjer wherein various payments to various employees were recorded, and that the addition has been made in accordance with the said documentary evidence. He has contended that the AO examined the household expenses of assessee which were met by additional payment which has been found to have been proved by AO as also by the learned CIT(A). He has contended that this loose sheet A-1/71 itself proves payment and it is documentary evidence proving the said payments. He has contended that the decision of Calcutta Tribunal cited above is distinguishable on fact. He has contended that the other decisions cited by the learned authorised representative of assessee are also distinguishable on facts. He has thus relied on the orders of authorities below.
15. In rejoinder, the learned authorised representative of assessee has contended that regarding household expenses no addition has been made; and that the learned CIT(A) himself has observed in the last para on p.
4 that household expenditure is no ground for making this addition.
16. We have considered the rival contentions, the relevant material on record, as also the cited decisions.
17. In T.S. Ventakesan v. Assn. CIT (supra), Tribunal, Calcutta has held as under : "In CBI v. V.C. Shukla 3 SCC 410 the Hon'ble Supreme Court has held that loose sheets of paper cannot be termed as 'book' within the meaning of Section 34 of Evidence Act. It has also been held therein by the Hon'ble Supreme Court that even correct and authentic entries in books of account cannot, without independent evidence of their trustworthiness, fix a liability upon a person. The Hon'ble Supreme Court also observed that even assuming that the entries in loose sheets are admissible under Section 9 of the Evidence Act to support an inference about correctness of the entries still those entries would not be sufficient without supportive independent evidence. In Amar Singh v. ITO (1995) 53 TTJ (Del) 692 : (1995) 54 ITD 375 (Del) it has been held by Delhi Bench of Tribunal that a statement made by a person in assessment proceedings relating to SLBP will not be relevant evidence under Section 33 in the assessment proceedings relating to a party different from SLBP. In Rama Traders v. First ITO (1998) 32 TTJ (Pat) 483 : (1998) 25 ITD 599 (Pat) the Patna Bench of Tribunal has held that the onus for proving the correctness of the entries appearing in the books of third party M/s Raj Trading Co. was not on the assessee, but on the Revenue. It was also held that presumption under Section 132(4A) could not be raised against the assessee who was a third party and additions to the assessee's income could not be made. In Kishin Chand Chellaram v. CIT (1980) 125 ITR 713 (SC) it has been held that though proceedings under IT Act are not governed by strict rules of evidence and the letter could be taken into account as evidence even without calling manager of the bank in evidence to prove his letter, but before the IT authorities could rely on the letter they are bound to produce letter before the assessee that the assessee could controvert the statement contained in it by asking for an opportunity to cross-examine the manager of the bank." "On the basis of a mere entry on a loose sheet found from the possession of a third person and a statement given by another third person in connection with search/assessment proceedings of still another third person without the copy of the statement being furnished to assessee and thereby allowing the assessee an opportunity to rebut the contentions made therein as also to cross-examine the witness it cannot justifiably be assumed/inferred that the amount mentioned in the entry on loose sheet was paid to the assessee. In turn the Tribunal deleted the addition." 18. In Kedamath Jute Mfg. Co. Ltd. v. CIT (supra), it has been held that entries in the books of accounts are not decisive/conclusive in the matter.
19. In ITO v. M.A. Chidambaram (supra) AO had .made an addition of Rs. 95,632 in the hands of assessee-respondent, namely, M.A. Chidambaram, on the basis of certain papers seized from the premises of I.K.Natarajan (N), a third party, during search, which allegedly contained business transaction of assessee. N was general manager of the employer-company and assessee was also employee of the said company.
There was also the statement of N supportive of the said slip. In that case the AO did not appreciate the explanation offered by assessee and had observed that N had explained the nature of slip and entries therein and also stated that N has deposed that he has handed over a sum of Rs. 88,109 to the assessee. The learned CIT(A) held that the Department had not established the live link to show that papers found during search related to and belonged to the assessee and that in the absence of such live link, the addition made on the basis of uncorroborated statement and slips of paper taken from the residence of a third party was illegal and in that case the addition could not be made unless transaction was found in the books maintained by the assessee. The Tribunal relied on the decision of Hon'ble Supreme Court in the case of Kishin Chand Chellaram v. CIT (supra) wherein it was held that the burden lay on the Department to show that money belonged to the assessee by bringing proper evidence on record and that the assessee could not be expected to call third parties in evidence to help the Department to discharge the burden that lay upon it, and also held that in the absence of corroborative evidence of third party, no addition could be made.
20. In Associated Stone Industries (Kota) v. Dy. CIT (supra), a diary was found from the possession of Shri S.N. Maheshwari (for short, S), an employee of assessee, who was on tour to Bombay at the time of his search, whereas the assessee-company was located at Pasoond. The statement of Shri A.K. Jain, manager of the assessee-company, was recorded at the business premises, the same day, during the course of search. The AO made addition on the basis of some differences in the entries and the statement. There was no statement of 'S', as 'S' had not returned to the business again after search. In the circumstances, it was held that there being only a statement of another person, no addition could be made in the hands of assessee on the basis of diary belonging to others and not belonging to the assessee.
21. In CBI v. V.C. Shukla (supra), it has been held that independent evidence as to trustworthiness of entries in the diaries is necessary to fasten the liability on the basis of the said entries. It has also been held therein by the Hon'ble Supreme Court that loose sheets are not included in the term "book".
22. In Asstt. CIT v. Shailesh S. Shah (1997) 59 TTJ (Mum) 574 : (1997) 63 ITD 153 (Mum), certain amounts were added to the assessee's income on the basis of loose papers seized from assessee during proceedings under Section 132. In that case the AO neither mentioned any material or evidence to show as to on what basis the figures came to be worked out, nor Sections 69 & 69D were invoked, nor did he discharge the burden to prove that alleged receipts were assessee's income. In this fact-situation, it was held that the addition could not be sustained merely on the basis of suspicion.
23. In the case of Hemraj Jagetia v. Dy. CIT being ITA No. 543/Ju/2000 for asst. yr. 1994-95 decided by this Bench on 10th May, 2002, the AO had made an addition on the basis of two loose papers being Annexure A-4/6B and Annexure A-2/9, but the assessee had denied the transactions mentioned in the said slips to be belonging to the assessee. The Tribunal held that the transactions mentioned in the said slips cannot justifiably be attributed to the assessee nor can the assessee be held to have made the above investments as mentioned in the said two Annexures, and in turn, deleted the addition.
24. In our considered opinion, it may hardly be deniable that the Indian Evidence Act or for that matter the statutory provisions of the Indian Evidence Act may not be applicable strictly to the proceedings under the IT Act but the basic/broad principles of the law of evidence do apply to the said proceedings. It is a settled position of law that the slips or loose sheets do not fall within the purview of 'book'. An entry in a book of accounts, maintained in the regular course of business, is relevant to be considered in respect of the transactions reflected thereby, no doubt, but is not conclusively decisive thereof or of the matter contained therein or liability reflected thereby, and much less so an entry in a loose sheet. It is only some other evidence, whether in the form of statement of the author of the entry or the statement of some other person connected with the transactions contained in the entry, or in some other form, supportive of the entry, which lends weight/credence to the entry in the book, depending upon the trustworthiness of the said deponent or reliability of the said other evidence, and it is only then that the said entry assumes the nature of a reliable evidence on the basis of which some addition can be made/sustained. An entry in a loose sheet is of a still feeble nature, and an entry in a loose sheet found in the possession of another/third person is much more so. As such a mere entry in a loose sheet, by itself, without the sworn statement of the related person, supportive of the entry, hardly has any evidentiary value, worth the name. The legal position being as emerging above, we are of the considered opinion that no liability can be fastened nor can an addition be made on the basis of a mere entry in a loose sheet without there being some further trustworthy/reliable corroborative evidence lending credence to such an entry.
25. Viewed as above, we find that in the instant case, apart from a mere entry in a loose sheet, there is not an iota of evidence on record supportive of the findings arrived at by AO, and confirmed by learned CIT(A) to fasten the liability on assessee in respect of the receipt of the amounts mentioned in the entry contained in the loose sheet A-1/71, which too was found not from the possession of assessee but from the possession of a third person whose statement is also not there which, if supportive, could lend some credence to it. As such, considering all the facts and circumstances of the case, the legal position emanating from the cited decisions, and the discussion made by us above, we find that the additions in the hands of assessee made by AO in the five assessment years, as being agitated in five appeals of assessee before us under consideration, on the basis of loose sheet, being Annexure A-1/P-71 are uncalled for and legally not sustainable. We, therefore, delete the said additions in all the five assessment years under consideration.
26. Ground No. 4 in asst. yrs. 1990-91, 1991-92 and 1992-93, involved in ITA Nos. 196 to 198/Del/2002, disputes the validity of initiation of reassessment proceedings under Section 148 of the IT Act. However, this ground has not been pressed by the learned authorised representative of assessee-appellant during arguments, and so the same is dismissed accordingly.
27. Ground No. 5 in asst. yrs. 1990-91, 1991-92 and 1992-93 involved in ITA Nos. 196 to 198/Del/2002 disputes the charging of interest under Section 234B. Similarly, ground No. 4 in asst. yrs. 1993-94 and 1994-95 involved in ITA Nos. 199 and 200/Del/2002 disputes the charging of interest under Section 234B. Regarding this ground, the learned authorised representative of assessee has submitted that this is a consequential ground and has contended that consequential relief may be accorded. The learned Departmental Representative of Revenue has not raised any specific material arguments on this count. Considering the rival contentions, we direct the AO to accord consequential relief to the assessee-appellant regarding charging of interest under Section 234B.28. In the result, ITA Nos. 196 to 200/Ju/2002 are allowed in part as indicated above.
29. Now we take up ITA No. 189/Jdpr/1999 and C.O. No. 112/Jdpr/1999, both pertaining to the assessee Shri Swaroop Chand Sethi. The Revenue has raised the sole ground in its appeal which disputes the deletion of addition of Rs. 3,50,000 made by AO on account of amount received by assessee over and above salary. The rival representatives have relied on their same contentions as raised by them in the case of J.R.C.Bhandari as mentioned/discussed above.
30. We have considered the rival contentions, the relevant material on record as also the cited decisions.
31. The fact-situation remains that a search was conducted on 16th Dec., 1993, search under Section 132(1) was conducted against J.K.Industries Ltd. and consequential searches were also carried out against various employees of the company M/s J.K. Industries. The assessee, being a senior executive of the company, JKI, was also subjected to search on 16th Dec,, 1993. Admittedly, no document was found from the possession of assessee pertaining to the addition in question. Certain loose sheets were found from the possession of Shri A.K. Chajjer an employee of JKI, in whose case also search was conducted on 16th Dec., 1993. Out of the loose sheets/papers found from the possession of Shri A.K. Chajjer during search of his residence, two papers being pp. 67 and 71 of Annexure A-1 have been used against the assessee by Department for holding that certain additional amounts were paid to various employees of the company including assessee, over and above their regular salaries. Accordingly, the AO made addition of Rs. 3,50,400 in the hands of assessee for the year under appeal. The learned CIT(A) deleted the addition, and so the Department is in appeal against the learned CIT(A)'s aforesaid order deleting the addition.
32. From the perusal of record, we find that the learned CIT(A), while deleting the addition made by AO, had mainly relied on the finding of learned CIT(A) in assessee's own case for asst. yr. 1993-94 to the effect that none of the pages bearing Nos. 67, 71 and 80 (pp. 13 & 14 PB), on which AO relied upon, indicate any payment by company or receipt by the appellant. It has been the contention of the learned authorised representative of assessee-respondent in his written submissions, that the Department has not gone in appeal against the said finding of the learned CIT(A) and the same has become final.
However, the facts in the case of present assessee-respondent are identical with those involved in ITA Nos. 189 to 200/Del/2002, discussed above, so we find this case squarely covered by our decision rendered above on similar issue, contained in ground Nos. 1 to 3 in the appeals of J.R.C, Bhandari as mentioned above. In our above decision, we have found the addition made on the basis of loose sheets found from the possession of third party and not corroborated by any other supportive evidence to be uncalled for and not sustainable in law. We follow our aforesaid decision and hold accordingly, and in turn, we uphold the impugned order of learned CIT(A) deleting the addition made by the AO on the basis of entries in the loose sheets being page Nos.
67 and 71 of Annexure A-1, found from the possession of Shri A.K.Chajjer. We order accordingly.
33. In the result, the appal of Revenue being ITA No. 189/Jdpr/1999 is dismissed.
34. In assessee's C.O. No. 112/Jdpr/1999 the assessee has raised sole ground disputing the sustenance of addition of Rs. 25,000. The learned authorised representative of assessee has contended that the sustenance of aforesaid addition is not justified and that the same should have been deleted. As against this, the learned Departmental Representative of Revenue has supported the orders of authorities below.
35. We have considered the rival contentions as also the relevant material on record. This addition has been sustained by learned CIT(A) as made by AO out of a cash of Rs. 58,000 seized during search. The AO made this addition as unexplained cash, in the hands of assessee, rejecting the assessee's plea that it belonged to his wife, Smt. Anjana Sethi, who is assessed to tax as rightly. From the perusal of record we do not find any mistake/defect in the impugned orders of authorities below in making/sustaining this addition and rejecting the assessee's aforesaid plea for the reason that in that last year's return no such cash has been shown to be available with the assessee's wife, Smt.
Anjana Sethi, as per her balance sheet as has been found by the learned CIT(A) in para 8 on p. 9 of his appellate order. We, therefore, decline to interfere with the same.