Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. Shri Badri Narain Sodhani

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 24 / 2017 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus Shri Badri Narain Sodhani, 38, Jai Jawan-11, Tonk Road, JaipurPAN No. AJAPS1375F ----Respondent Connected With D.B. Income Tax Appeal No. 27 / 2017 Pr. Commissioner of Income Tax, JAIPUR-II, JAIPUR ----Appellant Versus Shri Badri Narain Sodhani, 38, Jai Jawan-II, Tonk Road, Jaipur PanNo AJAPS1375F ----Respondent D.B. Income Tax Appeal No. 28 / 2017 Pr. Commissioner of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus Shri Badri Narain Sodhani, 38, Jai Jawan-11, Tonk Road, Jaipur PAN No. ----Respondent D.B. Income Tax Appeal No. 29 / 2017 Pr. Commissioner of Income Tax, JAIPUR-II, JAIPUR ----Appellant Versus Shri Badri Narain Sodhani, 38, Jai Jawan-II, Tonk Road, Jaipur PanNo AJAPS1375F ----Respondent _____________________________________________________ For Appellant(s) : Mr. R. B. Mathur For Respondent(s) : Mr. N. L. Agarwal _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 09/01/2018 1. In these appeals since identical questions of law and factsare involved, they are decided by this common judgment. 2.By way of these appeals, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal by thecommon order & judgment dated 26[th] November, 2016 hasallowed the appeal of the assessee. 3.This court while admitting the appeals framed the following question of law:- 1. D.B. Income Tax Appeal No. 24 / 2017 admitted on 24.01.2017 “Whether on the facts and circumstances of the case, theITAT was justified in confirming the order of CIT(A) in deletingthe additions of Rs. 27,15,000/- made by Assessing Officer onaccount of unexplained investment u/s.69 without appreciatingthe facts of the case in right perspective?” 2. D.B. Income Tax Appeal No. 27 / 2017 admitted on 24.01.2017 “Whether in the facts and circumstances of thecase and in law, the ITAT was justified in deleting theadditions of Rs. 35,80,000/- made by the AssessingOfficer on account of unexplained investments u/s. 69 ofthe Act without appreciating the facts of the case in rightperspective?” 3. D.B. Income Tax Appeal No. 28 / 2017 admitted on 24.01.2017 “Whether on the facts and circumstances ofthe case, the ITAT was justified in confirmingthe order of CIT (A) in deleting the additionsof Rs. 21,30,000/- made by the AssessingOfficer on account of unexplained investmentu/s.69 of the Act without appreciating thefacts of the case in right perspective?” 4. D.B. Income Tax Appeal No. 29 / 2017 admitted on 24.01.2017 “Whether on the facts and circumstances of thecase, the ITAT was justified in law in deleting the entireadditions of Rs. 1,41,65,000/- on account of unexplainedinvestment u/s.69 of the Act without appreciating thefacts of the case in right perspective?” 4.Counsel for the appellant Mr. Mathur has taken us to theorder passed by Tribunal wherein while considering the issue the Tribunal held as under:- 4. D.B. Income Tax Appeal No. 29 / 2017 admitted on 24.01.2017 “Whether on the facts and circumstances of thecase, the ITAT was justified in law in deleting the entireadditions of Rs. 1,41,65,000/- on account of unexplainedinvestment u/s.69 of the Act without appreciating thefacts of the case in right perspective?” 4.Counsel for the appellant Mr. Mathur has taken us to theorder passed by Tribunal wherein while considering the issue the Tribunal held as under:- 5. We have heard the rival contentions andperused the material available on the record.Relevant facts about the search, statement,declaration of additional income by assesse havebeen narrated above. Some facts which clearlyemerge from the record are that theincriminating material revealed that assesse wasengaged in financing business mostly onrepayable in 100 installments, carried out ofbooks and not disclosed. Statement was recordedduring the course of search stating the peculiartype of financing business was carried out on thebasis of the scribbling in the diary and loosepapers. In order to avoid the pressure of thesearch and consequent assessment proceedings,assessee initially declared the aggregateadditional income qua the undisclosed capital andsubsequently offered further additional income ofRs.5,00,000/- in A.Y. 2010-11. 5.1 Someassessed which were either disclosed orbelonging to other persons like FDRs and MutualFunds were excluded. Similarly cash and jewelryfound during the course of search were foundexplained and accordingly excluded while framingthe assessments. 5.2 In the assessment proceedings, AO did notaccept assessee’s declaration and assessed theundisclosed income at total amount ofRs.2,14,64,823/- for all these years. In firstappeal proceedings, ld. CIT (A) observed that theimpugned assessment orders passed by thelearned AO were very unspecific and vague innature and called for a remand report which wassubmitted on 3.5.2013 by ld. AO, with followingrelevant observations: “the seized documents contain entries which allegedlypertain to his undisclosed income. The entries arefound recorded in/by hand and at many places do not contain complete narration or details. The figures alsohave been written in a coded form and are eitherfollowed or denominated by a date and/or followedby certain dates. The entries are neitherchronological nor arranged in any other seeminglydiscernible order. There are also several repetitionswhich added to the complexity of the entries. Theentries presented data from which meaningfulanalysis was not only challenging but also extremelydifficult” 5.3 This report by ld. AO mainly stated that: a. The entries are neither chronological norarranged in any other seemingly discernibleorder. b. There are also several repetitions which addedto the complexity of the entries and meaningfulanalysis of data was not only challenging but alsoextremely difficult. c. Thus ld. AO implied that estimate as made inassessment orders were based on unspecific andvague material. Besides ld. AO did not apply theTelescoping Theory as contended by assesse forcredit of the additions made in earlier years. 5.4 These observations coupled with ignoring thecrucial fact about assessee’s undisclosed financebusiness was mainly based on 100 daysrepayable installments indicate that ld. AO’sestimate was not arrived at with just and properconsiderations and indicates lack of application ofmind. It may be mentioned that an estimate orbest judgment assessment has to be just andproper with proper nexus with the materialavailable on record. Judicial precedents hold thatan estimate which is not just, proper andreasonable is an arbitrary one and untenable. c. Thus ld. AO implied that estimate as made inassessment orders were based on unspecific andvague material. Besides ld. AO did not apply theTelescoping Theory as contended by assesse forcredit of the additions made in earlier years. 5.4 These observations coupled with ignoring thecrucial fact about assessee’s undisclosed financebusiness was mainly based on 100 daysrepayable installments indicate that ld. AO’sestimate was not arrived at with just and properconsiderations and indicates lack of application ofmind. It may be mentioned that an estimate orbest judgment assessment has to be just andproper with proper nexus with the materialavailable on record. Judicial precedents hold thatan estimate which is not just, proper andreasonable is an arbitrary one and untenable. 5.5 Ld. CIT(A) called for a remand report withcategorical observations that the assessmentorder was unspecific and haphazard as theincriminating material and papers are alsohaphazard and unspecific. The remand report didnot offer any new material or information as thesame was already on record. Ld. CIT(A) has notoffered any cogent reasons as to how the samehaphazard papers, became regular books. Theadditions have been enhanced by suffixing 3zeros to haphazard figures. The allegedtabulation sheets are neither mentioned in thebody of the assessment orders nor confronted tothe assessee. In the entirety of submissions,facts and circumstances it emerges that:- a. Ld. CIT(A) has erroneously held that the seized papersand documents were in the form of ‘Regular Books’ and maintainable in perfect order. These findings are contraryto record, it has not been established as to how theincriminating material which admittedly was haphazard innature became regularly maintained record. Thus there isnothing on record to indicate as to how the field findingsof ld. AO given after re-examination of record videremand reply dated 3.5.2013 were unreliable or wrong. Itwas a remand called by ld. CIT(A) on her own instancewhich supported her prima facie observations thatadditions were in vague and unspecific manner by ld. AO. b. Ld. AO impliedly admitted that the additions weremade on the basis of haphazard and unspecificincriminating papers.The entries are found recorded inhand and same entries at many places and they do notcontain complete narration or relevant details. The figuresappear to have been written in a coded form and areeither followed or denominated by a date and/or followedby certain dates. c. Ld. CIT(A) has not denied AO’s remand submissions thatthe incriminating material’s entries are neitherchronological nor arranged in any other seeminglydiscernible manner. There were several repetitions whichadded to the complexity of the entries. The entriespresented data from which meaningful analysis was notonly challenging but also extremely difficult. d. Assessee’s reliance on Hon’ble Delhi High Courtjudgment in CIT v Girish Choudhary (supra) supports hiscase that a figure of 48 written on incriminating materialcannot be assumed to be Rs.48 lakh without corroborativematerial. Further reliance placed on other judicial citations: NirmalFashions; Satyapal Wassan; Bansal Strips; PrsantAhluwalia; D.K. Gupta; Dr. Surenderanath Reddy (allsupra) support the propositions put forward by theassesse in this behalf. 5.6 Besides it emerges that due to haphazard,repetitive and unspecific nature of jottings,additions have not been made as relatable toparticular years based on nexus or evidence tothat assessment year. Consequently the ratio ofjudgments in the cases of Pooja Bhatt; AmarjeetSingh Baxi (HUF); Khajan Singh & Bros. (2008)304 ITR ; S.P. Goyal (Mumbai (TM) (all supra) isalso applicable to this case: Further reliance placed on other judicial citations: NirmalFashions; Satyapal Wassan; Bansal Strips; PrsantAhluwalia; D.K. Gupta; Dr. Surenderanath Reddy (allsupra) support the propositions put forward by theassesse in this behalf. 5.6 Besides it emerges that due to haphazard,repetitive and unspecific nature of jottings,additions have not been made as relatable toparticular years based on nexus or evidence tothat assessment year. Consequently the ratio ofjudgments in the cases of Pooja Bhatt; AmarjeetSingh Baxi (HUF); Khajan Singh & Bros. (2008)304 ITR ; S.P. Goyal (Mumbai (TM) (all supra) isalso applicable to this case: Ld. CIT (A) claims to have relied upon the ‘TabulationSheets’ allegedly generated during the course of theassessment proceedings. Hon’ble Supreme Court in thecase of Andaman Timber Industries v CCE (2015) 281CTR (SC) 241 has held that additions based on anymaterial without confronting to assessee cannot besustained. Consequently the alleged tabulation sheetscannot be a valid basis and material for sustaining suchestimate of undisclosed income. Sheets’ allegedly generated during the course of theassessment proceedings. Hon’ble Supreme Court in thecase of Andaman Timber Industries v CCE (2015) 281CTR (SC) 241 has held that additions based on anymaterial without confronting to assessee cannot besustained. Consequently the alleged tabulation sheetscannot be a valid basis and material for sustaining suchestimate of undisclosed income. 5.7 There are some variations in assessee’sversions during the course of assessmentproceedings. Having said that it cannot be lostsight of, that both ld. AO and ld. CIT(A) also wereinconsistent in their approach and working of estimate. In these circumstances the searchstatement of the assesse which is a first blushaccount of assessee’s affairs and impliedlyendorsed by search party also, becomes morereliable and preferable on preponderance ofprobabilities, surrounding circumstances andhuman conduct. This approach to resolve incometax issues has been endorsed by Hon’ble SupremeCourt in the case of Sumati Dayal 241 ITR 801. Itis noteworthy that assessee’s version of searchassessment about cash and jewelry found duringsearch and statement about FDR and Mutual Fundinvestment was also found to be correct. Thus itcannot be held that search statement and thedisclosure of additional income have no evidentiaryvalue. When there are conflicting opinions aboutestimate of income, one which is spelt out in thefirst blush will carry appreciable force more sowhen other estimates have self contradictoryobservations. 5.8 In view of the fact that ld. CIT(A) initiallyobserved that AOs additions are nonspecific andnot based on proper considerations, which isaccepted by ld. AO in remand proceedings, theestimate of ld. CIT(A) cannot be held to be justand reasonable. the estimate of ld. CIT(A) suffersfrom the infirmities as it is made with completeignorance about nature of assessee’s undisclosedfinancing business being based on 100 dailyinstilments repayments basis; no cogent reasonshave been given as to how the haphazard andunspecific incriminating material became regularbooks despite AO’s acceptance. Similarly ignoringthe search assessment and preferring one of thewavering versions suitable to revenue cannot becalled reliance on proper estimate. 5.9 In these facts and circumstances it is desirablethat that the estimate based on surrender ofadditional income as made by assessee by way ofa sworn statement during the course of search ismore preferable than the estimates made by ld.AO and ld. CIT(A). Both the estimates made byauthorities below are arrived at in unjust anduntenable manner, which cannot be upheld in viewof the observations mentioned above. 5.9 In these facts and circumstances it is desirablethat that the estimate based on surrender ofadditional income as made by assessee by way ofa sworn statement during the course of search ismore preferable than the estimates made by ld.AO and ld. CIT(A). Both the estimates made byauthorities below are arrived at in unjust anduntenable manner, which cannot be upheld in viewof the observations mentioned above. 5.10 In view of the facts, circumstances, rivalcontention and respectfully following the judicialprecedents cited above and that of Hon’blesupreme court Andamans Industries and SumatiDayal (supra) we accept the assessee’s disclosureto be more reliable than the estimate made by AO or ld. CIT(A). In view thereof we delete all theadditions made by the authorities below.” 5.Taking into consideration the fact that CIT(A) whileconsidering the matter with regard to Section 68 of the IncomeTax Act for each of the year has considered the books of accountsand has given factual finding and modified the order of the AOwhereas the Tribunal has not considered and has not touched thebooks of account and other things and passed the order. 6.In that view of the matter, we are of the considered opinionthat the matters are required to be remitted back to the Tribunalonly for the purpose of considering the amount referred for eachof the year. The Tribunal will give specific finding for each of theyear with reference to finding given by CIT(A) as well as AO. 7.The order of the Tribunal is quashed and set aside. Theissues are answered in favour of the department to the aforesaidextent. 8.The appeals stand allowed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J. B. M.Gandhi/Gourav/50-53