Heard learned counsel for the parties.
2.The present appeal is directed against the order passed by the learned ITAT, Circuit Bench, Ranchi in I.T. (SS) No. 63/Pat/2001 dated 23rd January 2002, whereunder the learned ITAT has dismissed the appeal and affirmed the order of the Commissioner of Income Tax (Appeals) dated 31stst May 2001 in W.T./W.T./E.D./IT/Appeal No. 378/Ran/S&S/99-2000 and remitted the matter to the Assessing Officer i.e. Assistant Commissioner of Income Tax, Investigation Circle to re-examine the issue afresh.
3.The brief facts of the case of the appellant are that the appellant submitted his returns for the block period 1stst April 1987 to 27thth October 1997 on notice issued after a search conducted in his premises under section 132(1) of the Income Tax Act, 1961 on 27thth October 1997. A notice under section 158BC of the IT Act was issued to the Assessee on 25thth March 1998. On 5thth October 1999 a notice under section 142(1) of the Income Tax Act was issued by the Joint Commissioner, Income Tax in connection with the assessment for the block period 1stst April 1987 to 27thth October 1997 asking him to produce the Books of Account and documents. The Assessee filed his returns wherein he has declared undisclosed total income of Rs. 8,85,000/- representing undisclosed investment made in acquiring relief bonds with the aforesaid sum. On clarification again being sought, the Assessee submitted his explanation whereupon notices under section 158BFA(2) of the Income Tax Act were issued asking him to show reasonable cause as to why he failed to furnish return of the undisclosed income. The appellant assessee appeared and replied to the show-cause. By order dated 29thth October 1999, the Assessing Officer / Assistant Commissioner of Income Tax, Investigation Circle, Ranchi found the undisclosed salary income of Rs. 3,39,900/-; unexplained payment on account of purchase of property totalling Rs. 3,00,000/-; unexplained investment in shares and bonds to the tune of Rs. 8,85,000/-. Consequently, on the basis of appreciation of seized documents, assessment have been made on total income of Rs. 15,24,000/- out of which, undisclosed income of Rs. 8,85,000/- have been given deduction, thereby assessment have been made on the total income of Rs. 6,39,900/-. Being aggrieved, the Assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Ranchi. The Appellate Authority vide order dated 31stst May 2001, after considering the submission of the Assessee and the Department of Revenue on the first ground of challenging the addition of Rs. 3,39,900/- as undisclosed salary income, held that the addition of the salary income of Rs. 1,80,000/- for the assessment year 97-98 made on the basis of certificate seized from the possession of the appellant, was proper. However, the said certificate could not be made a basis for estimate for other periods, as every assessment year is a self contained assessment year and block assessment has to be made on the basis of actual seizure made in the course of search operation. There was no material on record to suggest that for the other periods, the appellant was actually in receipt of salary income of Rs. 1,80,000/-. The Commissioner of Income Tax (Appeals) therefore directed the AO to take the salary of the appellant of Rs. 1,80,000/- for the assessment year 1997-98 and deleted the addition for the subsequent period. The appellant accordingly got the relief of Rs. 1,59,500/-. On the next ground of appellant's challenge to the addition of Rs. 3,00,000/- under the head 'unexplained payment' on account of purchase of property of Rs. 3,00,000/-, the Commissioner (Appeals) held that proper inquiries have not been conducted in this regard by the AO on the basis of paper said to have been seized by the AO and relied as statement of one P.P. Sharma. The Commissioner (Appeals) held that in order to come to a finding in relation to such addition, the Assessing Officer should have confronted P.P. Sharma as the seized document was found from his possession and not from the possession of the appellant himself. The Commissioner (Appeals) remitted the issue to the file of the AO to re-examine the issue afresh in the light of the direction given. In the result, the appeal was partly allowed.
4.The appellant thereafter preferred an appeal before the ITAT, Circuit Bench, Ranchi in I.T.(SS) No. 63/Pat/2001 challenging the addition of salary income for the period 1stst April 1995 to 31stst March 1996 asserting that the Assessee was getting Director's remuneration of Rs. 48,000/- from M/s Runga Projects Limited from 1stst April 1995. Learned Tribunal on hearing the department's representative as well as the Assessee, came to a conclusion that the learned CIT has rightly deleted the addition of undisclosed salary income for the subsequent year as the addition made by the Assessing Officer was not proper. It also found that on the basis of rectification petition under section 154 of the Income Tax Act, the Assessee should get further relief of Rs. 48,000/- on the basis of own averments made by the learned CIT (Appeals). Learned Tribunal further allowed the relief of Rs. 48,000/- on the addition of undisclosed salary of Rs. 1,80,000/- in the financial year 1995-96. In relation to other grounds raised by the Assessee relating to the addition of Rs. 3,00,000/- alleged to have been paid by one P.P. Sharma to Sarswati Kunj Cooperative House Building Society, the learned Tribunal after consideration of the submission of the parties, came to a conclusion that the learned AO should have cross-verified the same from the society and thereafter, this amount ought to be taxed in the hands of the Assessee as his undisclosed income, which the AO has failed to do. Learned Tribunal therefore upheld the order of the CIT (Appeals) for directing the AO to examine the issue afresh in the light of the direction and observations made by him under section 250. In the result, the appeal filed by the Assessee was partly allowed.
5.The appellant herein being aggrieved by the order of ITAT dated 31stst May 2001, has preferred this appeal. The appeal was admitted on 22ndnd November 2005.On 3/1/2014, after hearing the parties and on perusal of the materials brought on record, following substantial questions of law have been framed.
(a) Whether an assessment order regarding undisclosed income passed on the basis of loose sheet of papers has no evidentiary value?
(b) Whether Section 34 of the Indian Evidence Act renders a loose sheet of paper regularly kept in the course of business not sufficient by itself to charge any person with liability?
6.The order under challenge in this appeal has been assailed on behalf of the appellant that assessment order of adding undisclosed income on the basis of loose sheet of papers seized during the course of search and seizure operation in the premises of the appellant, has no evidentiary value. The Assessing Officer and the CIT (Appeals) and ITAT have not considered the provisions of section 34 of the Indian Evidence Act in proper perspective and seizure of such loose sheets of papers not regularly kept in the course of business, are not sufficient to charge any person with liability. Learned counsel for the appellant has relied upon a judgment of the Hon'ble Supreme Court in the case of Central Bureau of Investigation vs. V.C. Shukla and others reported in (1998) 3 Supreme Court Cases 410. Learned counsel has further relied upon a judgment rendered by the Bombay High Court in the case of Additional Commissioner of Income Tax, Bombay City vs. Lata Mangeshkar reported in [1974] 97 ITR 696 (Bom.). It is submitted by the learned counsel appearing on behalf of the appellant that the loose sheets of paper and diary which are unnumbered, have no evidentiary value if they are not corroborated by any other evidence. It has been further submitted that the Tribunal itself has observed that the matter requires investigation and remanded the matter. In any case, such loose sheets could not be the basis for any addition made as undisclosed income to the Assessee.
7.Learned counsel for the Revenue, on the other hand, has supported the impugned judgment. He has relied upon the provisions of section 158 B(b) of the Income Tax Act which lay down the special procedure for assessment of search cases. As per section 158B(b), undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act. Learned counsel for the Revenue has relied upon section 132(4A) of the Income Tax Act and submitted that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed that it belongs to such person; the contents of such books of account and other documents are true; and there is presumption in relation to signature and every other part of such books of account and other documents. It is submitted that the Assessee having failed to satisfy the Assessing Authority and the CIT (Appeals) as to the entries in such documents seized from his premises and having failed to rebut the presumption, the Assessing Officer and the CIT (Appeals) and the learned Tribunal were wholly justified in accepting the addition made on the basis of such loose sheets entries as undisclosed income seized from the premises of the appellant. It is further submitted that the learned CIT has remanded the matter for investigation by the Assessing Officer in respect of addition made in respect of undisclosed income of Rs. 3,00,000/- as payment made through one P.P. Sharma. The addition of the aforesaid undisclosed income therefore depends upon ascertainment of facts on the basis of query made by the Assessing Officer and in the wake of provisions specially incorporated in the Income Tax Act i.e. 158B(b) and 132(4A), no substantial questions of law arises for determination in the instant case.
8.We have heard learned counsel for the parties and perused the relevant materials on record. The appellant has assailed the orders passed by the learned ITAT inter-alia on the ground that in view of section 34 of the Indian Evidence Act, seizure of loose sheets from the premises of the petitioner are not sufficient to charge the Assessee with any liability as they have no evidentiary value. Section 34 of the Indian Evidence Act reads as under:
“34. [Entries in books of account, including those maintained in an electronic form] when relevant._ [Entries in books of account, including those maintained in an electronic form] regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability.”
9.The Assessee has also relied upon a judgment rendered by the Hon'ble Supreme Court in the case of Central Bureau of Investigation (Supra). However, the judgment relied upon by the petitioner is in relation to a CBI case where CBI investigation was based upon certain Jain diaries which were recovered from a person and, on the basis of entries made in such diary, certain persons were sought to be implicated for offence under the Indian Penal Code and Prevention of Corruption Act. The facts situation in the present case however is different. The instant proceeding arises out of search conducted under the provisions of section 132(1) of the Income Tax Act in the premises of the appellant, pursuant to which, the appellant was served with a notice under section 158BC of the Income Tax Act to submit returns for the block period 1stst April 1987 to 27thth October 1997. The Assessing Officer after consideration of the report filed by the appellant, proceeded to add undisclosed income of salary of Rs. 3,39,900/- on the basis of certificate seized from the premises of the appellant issued by M/s Rungta Projects Limited pertaining to the period 1stst April 1995 to 31stst March 1996. The Assessee was the Director in the same company i.e. M/s Rungta Projects Limited. The aforesaid addition was under challenge. The Appellate Authority thereafter deleted the addition to the extent of Rs. 1,80,000/- for the subsequent assessment year 1998-99. The Commissioner of Income Tax (Appeals) found that the addition can only be justified for the assessment year 1997-98 on the basis of the certificate seized from the possession of the appellant. It therefore allowed the relief of Rs. 1,59,000/- after deducting Rs. 1,80,000/- from the total addition of Rs. 3,39,900/-. In Appeal before the learned ITAT, the learned Tribunal found that the further relief of Rs. 48,000/- was allowable to the Assessee on the verification of income return filed by the Assessee showing Rs. 48,000/- received from M/s Rungta Projects Limited as salary for the said period. However, the learned Tribunal also found that the Assessee had not complied with the query made by the AO to his satisfaction and also in view of the fact that the Assessee himself was one of the Directors of paying company. The learned ITAT after allowing further relief of Rs. 48,000/-, agreed with the order of the CIT (Appeals) in relation to addition made on the basis of certificate seized during the course of search conducted in the appellant's premises.
10.In so far as other contention in respect of Rs. 3,00,000/- is concerned, the learned CIT (Appeals) and the learned Tribunal both have found that the Assessing Officer has not cross verified the payment made by one P.P. Sharma from the Society before adding undisclosed income in the hands of the Assessee. The learned Tribunal therefore has affirmed the direction of the CIT (Appeals) in remanding the matter to the AO to examine the issue afresh in the light of the direction and observations made by him under section 250 of the Act. Reference may be drawn to the provisions of section 158B(b) contained in Chapter XIVB which provides for special procedure for assessment of search cases. Section 158B(b) reads as under:
“158B(b). “undisclosed income” includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account of other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act [or any expense, deduction or allowance claimed under this Act which is found to be false].”
11.Provisions of Section 132(4A) of Income Tax Act are also material for considering the question raised by the appellant / Assessee before us which relate to search and seizure, are also quoted here-under:
“132(4A) Search and seizure._ Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed_
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.”
12.A provision has been made under section 158B(b) of the Income Tax Act that undisclosed income would include any money, bullion, etc. or any income based upon any entry in the books of account or other documents or transactions representing wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act. At the same time, section 132(4A) of the Act draws a presumption in relation to any books of account or other documents, money, etc. which are found in possession or control of any person in the course of a search; that contents of such books of account and other documents are true; and also signature and every other part of such books of account and other documents relating to its execution of any particular person. It raises presumption concerning correctness of contents of the documents (seized), author of the documents or it being executed, attested and stamped by the person as purported by it and propriety of the documents, money, valuable article or things vesting in the person through whom it was seized. This of course is rebuttable presumption which is available to the Revenue. The Assessee has to rebut the aforesaid presumption.
13.In the instant case, the learned Tribunal and the CIT (Appeals) have found that the proper cross verification was not made by the Assessing Officer before making such an addition and therefore, the matter has been remitted to the Assessing Officer for proper examination and cross verification. The aforesaid addition is therefore subject to ascertainment of facts on proper verification by the Assessing Officer. In such circumstances, the contention of the petitioner based upon interpretation of section 34 of the Indian Evidence Act, is misconceived and fit to be rejected. Even in the judgment relied upon by the appellant in the case of Additional Commissioner of Income Tax, Bombay City vs. Lata Mangeshkar (Supra) rendered by the Bombay High Court, the learned Division Bench also was of the view that the question raised by the Income Tax Department was purely on appreciation of evidence and it held that the learned ITAT after appreciation of the pieces of evidence relied upon by the Department to justify the addition made in the income of the Assessee based upon certain entries in the ledger of the Firm, seized by the Income Tax Authorities from the premises of that Firm, could not support the conclusion that even in a single instance, the Assessee could be said to have received money in black as remuneration. Learned Division Bench therefore found that the addition made in the income of the Assessee, based upon the entries made in ledger seized from the premises of another Firm, was not justified as no such actual payments could be proved on appreciation of evidence. In the instant case also, in the wake of clear provisions contained in section 158B(b) read with section 132(4A) of the Income Tax Act, the addition of undisclosed income on the basis of entries made in the loose sheet is dependent upon the investigation of facts and cross verification by the Assessing Officer. The substantial questions of law is accordingly answered against the Assessee. We therefore, do not find any merit in the appeal and therefore, the same is dismissed.