Pr. Commissioner Of Income Tax, Kota v. Shri Jai Kishan Massand, H

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 55 / 2017 Pr. Commissioner of Income Tax, Kota ----Appellant Versus Shri Jai Kishan Massand, H.No. 480, Shastri Nagar, Kota ----Respondent _____________________________________________________ For Appellant(s) : Mr. Parinitoo Jain For Respondent(s) : Mr. Siddharth Ranka with Mr. M. Iqbal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE VIJAY KUMAR VYASOrder 20/11/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department and allowed the cross-objection of the assessee. 2.This court while admitting the appeal on 10.07.2017framed following substantial questions of law:- “(i) Whether on the facts and in circumstancesof the case and in law, the diary impounded u/s.133A, could be treated as books of accounts forthe purpose of making addition ofRs.10,06,92,000/- u/s.68 specifically when theassessee had admitted that he had determinedhis income on the basis of such diary? (iv) Whether on the facts and circumstances ofthe case and in law, the Tribunal was justified inupholding the order of the CIT(A) and deletingthe addition of Rs.1,01,55,994/- made onaccount of interest income estimated on cashcredits by relying on the additional evidencesand admitting them specifically when theassessee failed to discharge the prima facie burden casted on him u/s68?” 3.Counsel for the appellant has taken us to the order of AO and contended that the AO while considering the matter, it has observed as under:- “2.Addition on account of unexplained cash credits u/s68 IT Act, 1961 A survey proceedings u/s 133A was concluded onthe business premises of the Assessee on06.10.2010. Alongwith other impounded documentsa diary Annexure A-3 was seized from the premisesof the Assessee. During the survey proceedings theAssessee admitted in his statement recorded on06.10.2010 at Page No.5 question No.11 that adiary Annexure 3 was shown to him and hedescribed the transactions entered in that diary. Therelevant part of the statement is reproduced asunder: iz’u % 11 losZ dh dk;Zokgh ds nkSjku vkidsO;kolkf;d ifjlj ij fnukad 06-10-2010 dks ,dgjs jax dh Mk;jh feyh ftl ij motivationdiary fy[kk gqvk gS (Annexure A-3) tks eSavkidks fn[kk jgk gw¡A —i;k bls ns[kdj ;g crk,fd blesa fy[kh xbZ izfof"B;ksa fdl ls lEcfU/krgS\ Li"V djsa rFkk i`"B la[;k 9 dks ns[kdj ;gHkh crk,a fd la[;k 550 ds le{k NC rFkk o"kkZvxzoky fnukad 20@1 dh entry fdltransaction dks n’kkZrh gS\ —i;k Li"V djsaAmRrj % bl Mk;jh esa mu O;fDr;ksa ls lEcfU/krizfof"B;ka gS ftudks gekjs }kjk ;k ek/;e lsfinance fd;k x;k gSA i`"B la[;k 9 ij tks 550dh la[;k fy[kh xbZ gS oks :-550000@& dh jkf’kn’kkZrh gS rFkk NC dk full form usehpUnpUnzizdk’k gSA bl Mk;jh esa i`"B la[;k 9 ij ckbZavksj fy[kk x;k uke bafxr djrk gS fd buO;fDr;ksa ls :i;k m/kkj fy;k gS rFkk nkbZa vksjfy[kk x;k O;fDr bafxr djrk gS fd bu O;fDr;ksa}kjk :i;k m/kkj fn;k x;k gSA bldk rkRi;Z ckbZavksj fy[kk x, O;fDr }kjk :i;k m/kkj fy;k x;kgS rFkk nkbZa vksj fy[ks x, O;fDr }kjk :i;km/kkj fn;k x;k gSA ;g transaction gekjs ek/;els fd;k tkrk gS] ftlds QyLo:i gesacommission feyrk gS ftls gekjs }kjk viuh vk;dj fooj.kh esa fn[kk;k tkrk gSA gekjh Mk;jh“esa blh rjg izfof"B;ka dh xbZ gSA Thereafter learned counsel for the appellant has also taken us to the observation made by AO which reads as under: “The above reply of the Assessee is untenableand unacceptable due to the following reasons:- 1) The Assessee accepted that the transactionsof the diary are related to money given todifferent parties. 2) Assessee in his explanation regarding nature& source of the money submitted that moneywas received from different lenders. vk;dj fooj.kh esa fn[kk;k tkrk gSA gekjh Mk;jh“esa blh rjg izfof"B;ka dh xbZ gSA Thereafter learned counsel for the appellant has also taken us to the observation made by AO which reads as under: “The above reply of the Assessee is untenableand unacceptable due to the following reasons:- 1) The Assessee accepted that the transactionsof the diary are related to money given todifferent parties. 2) Assessee in his explanation regarding nature& source of the money submitted that moneywas received from different lenders. 3) Now, onus is on the Assessee to submit suchdetails which could prima facie establish identity,genuineness and credit worthiness of theselenders. 4) Assessee failed to submit any such detailsduring the assessment proceedings for A.Y.2011-12 infact he submitted that this officeshould make efforts to establish transactionsclaimed to be brokered by the Assessee. 5) Assessee is even aware of details ofassessment proceedings carried out in case ofdifferent lenders and results thereof, butwhenever asked to submit details to establishthe said transactions he sought issuance of u/s131 of IT Act, 1961. 6) Assessee submitted that all transaction arethrough bank accounts and property entered inbooks of accounts of lenders & lendees. But nosuch documents have been submitted on thebasis of which he submitted his explanation. 7) Assessee has given money on loan and hehas to explain its nature and source, which hehas clearly failed to do so. 8) In the case of Haji Nazir Hussain & Co. Vs ITO(ITAT, Del-TM) 91 ITD 42 it was held that even incash of Cash receipts entered in notebook/rough cash book found uring the course ofsurvey Section 68 of I.T. Act 1961 applies.” He has also taken us to the finding arrived at by the “In view of the above discussion, an addition ofRs. 9,96,60,000/- + Rs. 862000+ Rs. 140000/-= Rs. 10,06,62,000/- on account of unexplainedcredits/investment in books of the Assessee onthe above said amount is made u/s 68 of IT Act,1961. Therefore, an amount of Rs.10,06,62,000/- is added back to returnedincome of the Assessee for A.Y. 2011-12. Penaltyproceedings u/s 271(1)(c) of IT Act, 1961 arebeing intiated for concealment of income andthereby filing inaccurate particulars of hisincome. (Addition of Rs. 10,06,62,000/-)” 5.He has also taken us through Para 3 for issue No.2 which reads as under: “It is clear from the statement of the Assesseethat he is engaged in the business of financing.Therefore, he must have earned interest incomeon the above amount in absence of any evidenceon the contrary. Considering all the facts &circumstances of the case the interest rate istaken at 12% per annum which is fair &reasonable. The interest has been calculated onthe period of the loan advance by the Assesseefor A.Y. 2011-12 as per the calculation in thetable above at para 2. The Assessee has earnedan amount of Rs. 10155994/- as interest incomeon the undisclosed investment of the Assesseefor A.Y. 2011-12. Therefore, the total interest onthese items comes out to be Rs. 1055994/-(10102715+8962+44317). This interest incomeis the undisclosed income of the Assessee fromother sources. Hence, undisclosed interestincome of Rs. 10155994/- is added back to thereturned income of the Assessee. Penalty proceedings u/s 271(1)(c) of ITAct, 1961 are being intiated forconcealment of income and thereby filinginaccurate particulars of his income. (Addition of Rs. 1,01,55,994/-)” 6..Counsel for the respondent has also taken us to the finding arrived at by the CIT(A) which reads as under: “ In this case, additional evidence in the form ofconfirmations etc. were filed by assessee whichwere admitted and forwarded to the AO. The AO in his report submitted as under: Penalty proceedings u/s 271(1)(c) of ITAct, 1961 are being intiated forconcealment of income and thereby filinginaccurate particulars of his income. (Addition of Rs. 1,01,55,994/-)” 6..Counsel for the respondent has also taken us to the finding arrived at by the CIT(A) which reads as under: “ In this case, additional evidence in the form ofconfirmations etc. were filed by assessee whichwere admitted and forwarded to the AO. The AO in his report submitted as under: Kindly refer to your letter No.CIT(A)/KTA/15-16/2825 dated 25.02.2015 on the above mentionedsubject, through which you have enclosed theadditional evidences submitted by the assesseebefore you. In this letter you have directed toexamine the additional evidences submitted by theassessee. You have further directed to examine alllenders (source of funds) and report. In this connection it is submitted thatadmission of additional evidences are stronglyobjected as the sufficient opportunity wasprovided to the assessee during the course ofassessment proceedings to submit such detailswhich could prima facie established identity,genuineness and creditworthiness of theselenders. Without prejudice to the above, thefactual report is as under. The additional evidences enclosed with letterdated 25.02.2015 which have been submitted bythe asseessee before you are the copies ofledger a/c only in respect of borrowers. Noconfirmation bank a/c, B/s & ITR of the lendershave been filed by the assessee. As such, as peryour direction, to examine the source of funds oflenders notice u/s 133(6) have been issued to allthe lenders vide this officer letter dated08.04.2015 & 15.05.2015 to all the followingdetails:- a. Confirmation & ledger copy of the transactions. b.Bank account statement of relevant transaction. c.Copy of Balance Sheet along with relevantAnnexures to B/S reflected the transactions. Vide this officer letter dated 09.06.2015 all thelenders were asked to produce the copy ofITR/acknowledgement of return filed for the AY2011-12 to this office by 16.06.2015. Summonsu/s 131 of the IT Act were also issued to 03groups of lenders (which covered large chunk ofentries as lenders) namely Maheshwari Brothers(Partners), Carrier Point Infosystem Ltd.(Directors) and individuals & HUF of Jajodiafamily. The statements of Individual & HUF ofJajodia family have been recorded. However,Partners of Maheshwari Brothers & Director ofCarrier Point Infosystem Ltd. Have soughtadjournment in response to summons u/s 131.” 7. However, Tribunal while considering the same has confirmed the order of the CIT(A) and also allowed the cross-objections filed by the assessee. She has also relied upon the observation of the Tribunal which reads as under: 8. “Thus it is evident on the face of the RemandReport itself that ADMITTEDLY the entries on theDiary reflects Lenders and the Borrowers againsteach other and therefore, it is amply clear thatthe assessee has nothing to do in thesetransactions except that he has acted Brokerbetween them and that it was not his money. I have gone through the AO’s finding,assessee’s submission, AO’s remand report andassessee’s rejoinder. In most of the cases, the lender as well asthe borrower has confirmed the transaction insome of the cases, no reply was furnished u/s136 (6), however, most of their confirmationswere submitted by the assessee. Regarding thedifference in dates, the same has no bearing onthe assessment of income of assessee (as theassessee was apparently acting as a broker).Only in one case i.e. in the case of Sh. OmPrakash, the lender denied the transaction.”Counsel for the respondent has placed reliance upon the following judgments :- 1. Commissioner of Income Tax vs. Jai KumarBakliwal, [2014] 45 taxmann.com 203(Rajasthan), wherein it has been observed asunder:- In most of the cases, the lender as well asthe borrower has confirmed the transaction insome of the cases, no reply was furnished u/s136 (6), however, most of their confirmationswere submitted by the assessee. Regarding thedifference in dates, the same has no bearing onthe assessment of income of assessee (as theassessee was apparently acting as a broker).Only in one case i.e. in the case of Sh. OmPrakash, the lender denied the transaction.”Counsel for the respondent has placed reliance upon the following judgments :- 1. Commissioner of Income Tax vs. Jai KumarBakliwal, [2014] 45 taxmann.com 203(Rajasthan), wherein it has been observed asunder:- 17. As observed hereinabove, though under s.68, AO is free to show with the help of theenquiry conducted by him into the transactionwhich has taken place between the creditor andthe sub-creditor that the transaction betweentwo were not genuine and that the sub-creditorhad no creditworthiness, it will not necessarilymean that loan advanced by the sub-creditor tothe creditors was income of the assessee fromundisclosed sources unless there is evidencedirect or circumstantial, to show that theamount which had been advanced by the sub-creditor to the creditor had actually beenreceived by the sub-creditor from the assessee. 18. The logical interpretation will be that whilethe assessee has to prove as special knowledgei.e. from where he has received the credit andonce he disclosed the source from which he hasreceived money, he must also establish that sofar as his transaction with his creditor isconcerned, the same is genuine and his creditor had the creditworthiness to advance the loanwhich the assessee had received. When theassessee discharges the burden so placed onhim, onus then shifts to the AO, if the AOassesses the said loan as the income of theassessee from undisclosed source he has toprove either by direct evidence orindirect/circumstantial evidence that the moneywhich the assessee received from the creditoractually belong to and was owned by theassessee himself. 19. If there is direct evidence to show that theloan received by the assessee actually belongsto the assessee, there will be no difficulty inassessing such amount as the income of theassessee from undisclosed source but if there isno direct evidence in this regard, then theindirect or circumstantial evidence has to beconclusive in nature and should point to theassessee as the person from whom the moneyhas actually flown to the hands of the creditorand then from the hands of the creditor to thehands of the creditor (assessee). 2. Commissioner of Income Tax vs. VinayakPlasto Chem (P.) Ltd., [2014] 42 taxmann.com43 (Rajasthan), wherein it has been observed asunder:- 15. In our view, the Tribunal came to acorrect conclusion and no addition wascalled for. Merely because a project reportshows an estimated figure does not provethat undisclosed investment to the tune ofRs. 36,21,692 was really made by theassessee-respondent. Addition has to bebased on proper foundation and cannot bemade merely on the basis of such anestimated project report, which one mayprepare for diverse purposes and really donot indicate as to actual investmenthaving made by the assessee. Burdenunder s. 69 is on the Revenue and itfailed. 16. The AO has blindly made additionmerely on the basis of project reportwithout bringing further evidence in theshape of say a valuation report which mayhave been obtained by the AO from itsValuation Officer to indicate prima facie 16. The AO has blindly made additionmerely on the basis of project reportwithout bringing further evidence in theshape of say a valuation report which mayhave been obtained by the AO from itsValuation Officer to indicate prima facie that investment to such an extent wasmade, then in our view the AO could havebeen well justified to support its additionbased on the project report vis-a-vis thevaluation report or any other materialevidence. However, nothing is apparent onthe face of record as to whether anyexercise in this direction was made or not.Therefore, in our view, both the appellateauthorities have come to a concurrentfinding of fact based on appreciation ofevidence on record and no substantialquestion of law can be said to arise out ofthe impugned order as it is entirely basedon finding of fact. The first question shallbe only of academic interest and would beexamined in an appropriate case. 3. Commissioner of Income Tax (Central) vs.Jawahar Lal Oswal, [2016] 67 taxmann.com108 (Punjab & Haryana), wherein it has beenobserved as under:- 20. Before answering the questions posed, itwould be appropriate to record that suspicionand doubt may be the starting point of aninvestigation but cannot, at the final stage ofassessment, take the place of relevant facts,particularly where a deeming provision is soughtto be invoked. The principle that governs adeeming provision is that the initial onus liesupon the Revenue to raise a prima facie doubton the basis of credible material. The onus,thereafter, shifts to the assessee to prove thatthe gift is genuine and if the assessee is unableto proffer a credible explanation, the AO maylegitimately raise an inference against theassessee. If, however, the assessee furnishes allrelevant facts within his knowledge and offers acredible explanation, the onus reverts to theRevenue to prove that these facts are notcorrect. The Revenue cannot draw an inferencebased upon suspicion or doubt or perceptions ofculpability or on the quantum of the amount,involved. Any ambiguity or any ifs and buts inthe material collected by the AO mustnecessarily be read in favour of the assessee,particularly when the question is one of taxation,under a deeming provision. Thus, neithersuspicion/doubt, nor the quantum shalldetermine the exercise of jurisdiction by the AO.The above exposition shall not be misconstrued Chouhan/132 to restrict the power of the Revenue to raise aninference as to the efficacy of material producedby or before the AO. 9.Counsel for the respondent contended that in subsequent order, the assessee has been accepted as a brokerand the finding in this regard is as under :- “ The above finding of fact is not controvertedby the revenue by placing any contrary materialon record. There is no dispute with regard to thefact that the assessee has acted as a broker.The AO has not brought any material on recordsuggesting that the credits as reflected in thediary pertained to the assessee. In the absenceof such details, in our considered veiw, the AOwas not justified in making the addition withoutconsidering the debit entries. Therefore, we donot see any reason to interfere in the order of ld.CIT(A), same is hereby upheld. This ground ofthe revenue’s appeal is rejected.” 10.In view of this, we are of the considered opinion thatthe assessee is a broker and after payment report received, theCIT(A) has rightly observed in favour of the assessee. We are incomplete agreement with the view taken by the CIT(A) and theTribunal. Therefore, both the issues are answered in favour ofassessee against the department. 11.The appeal is dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J.