1--.-'^—.........**K*^. P.R.Nc.... ^51-k&^ ^w^^-, preswteu -Y '>"'"^[...^4-tsK-(:? '•"'-"""""'"'" •\^'^.^. IN THE HIGH COURT OF CHHATTISGARH ATBILASPUR TAX CASE No. 2-'^— /2006 APPELLANT RESPONDENTS Comniissioner of Income Tax, Bilaspur. VERSUS 1. Income Tax Appellate Tribunal, Jabalpur. '2. Naresh Wassan, Main RoadKorba (C.G.) APPEAL UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 KS E^ ^^ ^ 1 / 1 ,\v CY^) y fv :^ .:- 1. Shradha wassan W/o Sate [^aresh fl^ 2. Miss Kahima Wassan daughter It-— l^aresh Wassan a minor Through Smt. Shradha Wassan Bothe R/o ^-^^.^^ %• fflGH COURT OF CHHATTISGARHAT BILASPUR JT TAX CASENo.22 of 2006'''., n AFf\ •, &-U-'t APPELLANT RESPONDENTS Commissioner oflncome Tax, Bilaspur. VERSUS Income Tax Appellate Tribunal, Jabalpur & Others. Judgment for consideration Sd/- Satish K. Agnihotri Judge Hon'ble Shri Justice Radhe Shyam Shamia g c^en.^- Sd/- R.S. Sharma Judge -/* Post for pronouncement ofthe judgment on the _S_dscy ofNovember , 2011 Sd/- 6-11-2011 .^ "/.::-s^. i|l^;!3M£-». 1 vy' '<». mOH COURT OF CHHATTISGARH AT BILASPUR APPELLANT RESPONDENTS TAX CASE No. 22 of 2006 "^.. Commissioner oflhcome Tax, Bilaspur. VERSUS Income Tax Appellate Tribunal, Jabalpur & Others. APPEAL UNDER SECTION 260-A OF THE INCOME TAX ACT. 1961 DB: Hon'ble Shri Satish K. Aenihotri & Hon'ble Shri Radhe Shyam Sharma, JJ. Present: Shri Rajeev Shrivastava, Advocate with Shri Sameer Shrivastava, Advocate for the appellant/Revenue Shri L.L.Sharma, Advocate with Shri Anand Dadariya, Advocate for the respondent No. 2 and 3/Assessee. JUDGMENT CDelivered on .. .9. .day ofNovember, 2011) Per SATISH K. AGNIHOTRI, J. 1. The instant appeal has been filed by the Commissioner oflncome Tax, Bilaspur (hereinafter referred to as 'the Revenue') against the order dated 19.04.2006 passed by the Income Tax Appellate Tribunal, Jabalpur, (for short 'the Tribunal') in I.T.A No. 301/Jab/1999. 2. The appeal of the Revenue was admitted by this Court on 13.02.2007 onthe following substantial questions oflaw: "(i). Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal were right in law in deleting the sum of Rs. 19,30,000/- added by the Assessing Officer to the assessee's total income as undisclosed loan advanced by the assessee within the meaning of Section 69 and 69(C) of the Income Tax Act for the Assessment Year 1992-03? %. V "; (ii) Whether on the facts '• and circumstances of the case the Hon'ble Income Tax Appellate Tribunal were justified m law in agreeing that the impugned amount constituted examination of assessee's Hotel project, when in fact, and till date i.e. 11 years after the search of April 1999 no such Hotel was either constructed or existed? (iii) That the order of the Tribunal is liable to be set aside being perverse and contrary to the facts on record." 3. The facts, in brief, relevant for adjudication of the substantial question oflaw, as aforestated, are that the business and residential premises of the assessee-Naresh Wassan was searched in April, 1995 by the Revenue under section 132(1) ofthe Income Tax Act, 1961 (for short 'the Act, 1961'). During the course ofsearch, an LIC diary was recovered wherein at page 36 of the said diary, there was a list of persons against whom various amounts were mentioned, as under: (1) Haribhai (Umia Hardware) (2) Nanjibhai (3) Haribhai (4) G.ASwami (5) Manoharlal Lamba (6) Mohan Wassaa (7) Romi Narendra Bindra (8) Bassi K. Nair (9) Amar Singh Chawla , (10) Rajnaiayan Singh (11) Cash Total Rs. 500000/- 100000/- 150000/- 100000/- 40000/- 400000/- 40000/- 250000/- 150000/- 100000/- 100000/- 1930000/- .. ':.-^.~^ fCl^ '''ias.^S.-atfS* A notice under section 143 of the Act, 1961 was issued to the assessee on 11.02.1997 by the Assessing Officer (for short 'the AO') which was served on the assessee on 19.02.1997. The assessee filed his income tax retum on 22.04.1997 declaring an income ofRs. 1,60,110/- The case was heard after issue ofnotice under section 143(2) which was attended through Advocates and Accountants, written as well as oral submissions were made and explanations were also filed. The case ofthe assessee was that the amount mentioned in the aforesaid diary was not the advances made by the assessee to the parties, but the same was expected contribution by the parties for the purpose of hotel business. In support ofhis claim, the assessee filed afBdavits ofall the persons stating therein that there was a proposal to invest the aforestated amount mentioned against their names, for the hotel project of Naresh Wassan. According to the AO, the financial position of those persons were not mentioned in the affidavit. Out of 10 persons, statement of five persons namely Rajnarayan Singh, Nanjibhai Patel, Jagmohan Wassan, Haribhai Patel, and Shri Kushabraj Lamba s/o Late Manoharlal Lamba were recorded by the Inspector of Income Tax in his presence. It was farther observed that out of five persons, two were not the income tax payee namely Rajnarayan Singh and Shri Najibhai Patel. It was further stated that it was only a .proposal and the hotel project could not be initiated as the money could not be arranged by them. The AO observed that no deponent could tell the date of alleged meeting which took place regarding construction of the hotel, though, a copy ofthe application dated 20.01.1992 filed before the ChiefExecutive Officer, S.A.D.A. Korba, was produced. Thus, fhe AO came to the conclusion that the proposed contribution mentioned in the assessee's diary does not appear to be correct but it was the loan given to the said persons by the assessee. It was held that the amount remained unexplained and therefore, the amount of Rs. 19,30,000/- was added to the income of the assessee. 4. Thereagainst, the assessee preferred an appeal before the Commissioner of Income Tax [for short 'the CIT(A)}. The CIT(A), after having considered all the facts came to the conclusion fhat the amounts, as aforestated, did not represent the loan given by the assessee and the AO was not justified in holding that the amount of Rs. 19,30,000/- represented the undisclosed investment of the assessee, and thus, deleted the addition of the aforesaid amount. It was further observed that the persons have shown their willingness to participate in the Hotel project but just because they could not intimate the probable source of funds, adverse view cannot be taken. The creditworthiness of these persons cannot be doubted. The CIT (A) has referred not only page 36 but also page 35 of the diary where there was some discussion with regard to preparation of food etc. the application dated 20.01.1993 made to ftie Chief Executive Officer, S.A.D.A. Korba, also confimied the contention of the assessee that he alongwith others, was interested in hotel project on a plot owned by M/s. Omprakash Satyapal Conta-actor, sifuafed in Agroha Road, Korba. The business plaa offhe assessee was also examined by the CIT (A). Thus, it was finally concluded that the entire addition of Rs. 19,30,000/- was based on assumptions that the entries made at page 36 ofthe diary represented loans advanced to the persons by the assessee. In the affidavit given by some of the persons, it was clearly stated that they have neither given nor taken any loan to/from the assessee but they proposed to invest the amount in the hotel project ofthe assessee. Thus, denial ofthe affidavits was not justified. Accordingly, the order of the AO was set aside and it was held that the amount of Rs. 19,30,0007- does not represent undisclosed investment ofthe assessee. 5. Against the order passed by the CIT (A), fhe Revenue preferred an appeal before the Tribunal. The question before the Tribunal in appeal filed by the Revenue was whether the CIT (A) had erred in deleting the addition ofRs. 19,30,0007- made by the A.O. to the income from undisclosed source. The Tribunal, having considered the entire facts again, held that the reasons assigned by the CIT(A) in deleting the additional income was sound and convincing. In the 11 entries made at page 3-6, 10 different names were written and against one entry, only term 'cash' was written, holding that the amount mentioned therein was advanced as loans to the persons, was not proper. The afBdavits filed by the persons clearly stated that they proposed to contribute for the hotel project but no money have been received by the either side. Thus, it does not suggest .'•-. ^ ,\ '^'•, that the loan amount was given to them by the'assessee. In view of that, the fmdings recorded by the CIT(A) was confumed and the appeal filed by the Revenue was dismissed, 6. Shri Rajeev Shrivastava, leamed counsel appearing with Shri Sameer Shdvastava, leamed Advocate for the revenue would submit that the CIT (A) as well as the Tribunal have committed mistake in accepting the additional evidence i.e. the affidavits in conto-avention ofRule 46 ofthe Income Tax Rules, 1962 (for short 'the Rules, 1962'). In support of his contention, he would rely on decision ofthis Court in Commissioner oflncofne Tax v. Hi-tech Abrasives Ltd . Shri Shrivastava would next submit that the affidavits could not have been believed for want of corroborative evidences as other circumstances cleariy suggested that the statements on affidavit should not have been accepted as tme. The absence ofdenial by the other side would not by itselfbe sufficient to establish the truthfalness of the affidavits. In support of his contention, Shri Shrivastava would rely on a decision of the High Court ofAllahabad in Sri Krishna v. Commissioner oflncome Tax & Others . Shri Shrivastava would next contend that in terms of ca&h credit, the assessee was required to prove identity of the creditor, capacity of such creditor to advance the money and the genuineness of the transaction. In the present case, the assessee miserably failed to discharge any of this burden. Shri Shrivastava would rely on a decision of the High Court of Rajasthan in ' Tax Case No. 19/2009, decided on 22.02.2010 2(1983)142ITR618(AII) ^ 'vT^ '^ i:'? i-^-. a v •y/ \». '^1. Rajshree Synthetics (P) Ltd. v. Commissiorier :of Income Tax & Another . 7. Shri Shrivastava would further submit that there was no explanation offered by the assessee in respect of the undisclosed and unexplained income found by the AO, fhus, the AO had rightly added the same to the total income of the assessee. In support of this contention, he would rely on a decision of this Court in M/s. Mahesh Ispat Udyog v. The Commissioner oflncome Tax, Raipur . 8. On the other hand, Shri L.L.Sharma, leamed counsel with Shri Anand Dadariya, leamed Advocate appearing for the respondenVassessee would submit that the findings recorded on the notings ofthe page 36 ofthe diary, is a finding offact and no question of law arises in this appeal for consideration. The entry recorded at page 36 does not indicate in any manner that the amount shown against such names, was the loan advanced to them. All these persons had filed affidavits affmning the submissions made by the assessee. Even in the examination conducted by the Inspector of Income Tax, no person who were examined, had admitted at any place that they have taken or given any loan or advanced from/or to the assessee. There is no other evidence which may lead to any other conclusion as recorded by the CIT(A) and confirmed by the Tribunal. In support of his contention, Shri Sharma would rely on a decision of the High (2002) ITR 331 (Raj) ITA No. 36/2004, decided on 01.11.2011. i'-t-,. x^ '^ ^ ./'/ 9. Court of Madhya Pradesh, in Assistant Commissioner of Income Tax v. Rajaram & Brothers , wherein it was held that the issues relating to addition/deletion under various heads on account of seizure of some loose papers and documents are issues of fact and do not involve any interpretation of law. He would also rely on a decision of the High Court of Rajasthan in Commissioner of Income Tax v. S.C.Sethi wherein it was held that the fmding recorded by the Tribunal, being finding of fact, did not gave rise to question of law. It was similarly held in Commissioner oflncome » Tax v. Kailash Chand Sharma . Shri Shanna would further contend that the addition of income cannot be made solely on the basis ofnoting without corroborative evidences. In support ofthis contention, he would rely on a decision of the High Court of Punjab & Haryana, in Commissioner of Income Tax v Vishal Rubber Products , and would pray for dismissal ofthis appeal. Having heard leamed counsel appearing for the parties, perused the pleadings and documents appended thereto, it appears that the basic question in the case on hand is asto whefher the fmding of the AO, which was set aside by the CIT (A) aad confirmed by the Tribunal, was just and proper. There is no dispute that the AO recorded the finding on the basis of entries mentioned in the diary at page 36. The AO has ignored completely the contents of the affidavits filed by the named persons and even in the examination (2005) 274 ITR 122 (MP) s (2007) 295 ITR 351 (Raj) 7(2005)198CTR(RaJ)2bl 8 (2003) 264 ITR 542 (P&H) \». by the Inspector of Income Tax. It was not foitod that there was any doubt with regard to their proposed contribution in the proposed hotel project to be installed by the assessee. It is a case where it is no where found that there was involvement if any actual transaction ofamount between fhe parties. It appears to be a mere proposal where other persons, as they have stated in their affidavits expressed their desire to contribute for the hotel proposal. Thus, even ifthe source offund have not been given asto how the money would be arranged, the affidavits caimot be held as •s untrastworthy. The CIT(A) as well as the Tribunal have rightly considered all the facts in detail and came to the conclusion for disallowing the addition ofthe amount ofRs. 19,30,000/-. 10. The next question asto whether there is no contravention of Rule 46 ofthe Rules, 1962 raised by the Revenue , has no merit as all the evidences were discussed before the AO and no additional evidence was taken on record at the stage of CIT (A) proceedings or before the Tribunal. Thus, it cannot be held that there was no compliance ofstatutory requirement ofRule 46 ofthe Rules, 1962. Further, fhe Revenue does not get any assistance from the decision of this Court in Hi-tech Abrasives Ltd . The other decisions cited by the revenue are also not of any relevance in the facts ofthe case as there was no circumstances which suggest that the statement made in affidavit should not be accepted as tme. The decision of Sri Krishnc^ and Rajshree Synthetics (P) Ltcf is also of no assistance in the case on hand. ^ '"'. "^ 10 %. 11. There is no dispute that it is a pure question bf appreciation of facts as the same has been done on the proper appreciation of evidence. The finding of the AO was rightly held as erroneous. There is no perversity in appreciation of facts. 12. The substantial question of law arises for consideration only if there is perversity in the finding of fact. The Supreme Court, in Vijay Kumar Talwar v. Commissioner oflncome Tax, Delhi, held as under: "23. A finding of fact may give rise to a substantial question oflaw, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See Madan Lal v. Gopi, Narendra Gopal Vidyarthi v. Rajat Vidyarthi, Commr. of Ciistoms v. Vijay Dasharath Patel, MetroarkLtd. v. CCE and W.B. Electricity Regulatory Commission v. CESC Ltd.)". 13. This Court, in Commissioner of Income Tax, Raipur v.Shri Mangalchand Parekh, GE Road, Rajnandgaon , observed as under: "30. In view of the foregoing, we are of the considered opinion that fhe findings recorded by the CIT (A) and affmned by the ITAT are based on proper appreciation of facts and are not perverse, being correlated with each and every transaction. Thus, the' issue is purely question of facts. No question of law, more so substantial 10(2011)1SCC673 ITA No. 16 of 2004 & connected matter, decided on 17.10.2011 11 questions of law, as aforestated, aris'e in the facts ofthe case. 31. As an upshot, both the appeals being bereft of merit, are liable to be and are hereby dismissed." 14. The instant appeal involves only on the question of facts, as the facts have been determined by the CIT (A) and affirmed by the Tribunal. Thus, it is a question of facts alone and no question of law, much less substantial question of law, arise in this case for consideration under section 260-A ofthe Income Tax Act. 15. The appeal is accordingly dismissed. No order asto costs. Sd/- Satish K. Agnihotri Judge Sd/- R-S. Sharma Judge Amit