Sanjay Agarwal , Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 681/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 1990-91

Shri Sanjay Agarwal cuke The DCIT, S/o- Sh. Bankey Bihari Lal Agarwal Vs. Circle- Bharatpur. Nadiya Mohalla, Bharatpur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABDPA 4393 G vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA) jktLo dh vksj ls@ Revenue by: Shri Kailash Mangal (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 17/12/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/02/2015

vkns'k@ ORDER

PER: R.P. TOLANI, J.M.

This is a small appeal filed by the assessee against the order

dated 17/05/2012 by the learned CIT(A), Alwar for A.Y. 1990-91.

Respective grounds of appeal are as under:

"1. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the legality of assessment order passed U/s 148/143(3).

2 ITA 681/JP/2012_ Sanjay Agarwal Vs. DCIT

2. The learned Commissioner of Income Tax (Appeals has erred on facts and in law in upholding the validity of the assessment order even when accepting that assessment has been made without affording any opportunity to the assessee to prove his case by giving him the copy of the documents seized as per Annexure-A-1.

3. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming addition of Rs. 1,03,075/- (Rs. 89,145+Rs. 9500 + Rs. 4,430) in respect of entries in the red diary KA6. He has further erred in confirming the said addition:-

(i) on the ground that the regular books of accounts which were seized in search, in which these entries are recorded is not available with the A.O. and therefore the contention of the assessee cannot be subjected to examination/verification.

(ii) by not accepting the realization of advances of Rs.

89,145/- for which confirmations were submitted.

(iii) by not allowing the credit of opening capital of Sh.

Sanjay Agarwal to the extent of Rs. 500/- and the loan received from Sh. Laxman Singh at Rs. 9,000/-.

(iv) not giving the credit of Rs. 4,430/- which was otherwise verifiable from the regular books of accounts.

4. The learned Commissioner of Income Tax (Appeals) has erred on facts and in law in making an addition of Rs. 25,000/- on account of interest and brokerage business without any basis. He has further erred in making the addition ignoring that interest income earned by the 3 ITA 681/JP/2012_ Sanjay Agarwal Vs. DCIT

assessee is duly recorded in the books of accounts. He has further erred in making this addition without allowing the set off of the addition confirmed by him in ground No. 3 above."

2. Brief facts are a search was conducted at the residential and

business premises of the father of the assessee Shri Banke Bihari

Agarwal on 14.09.1989 and 20.09.1989, assessee lived with his father.

Along with father, the regular books of accounts of the assessee were

also seized vide Annexure A-1. After search the assessee's father and

the assessee requested time and again to provide the photocopy of the

seized records, which were not provided including assessee's books i.e.

Annexure A-1. In order to obtain the photocopy of books of accounts as

per Annexure A-1, father filed a writ petition and stay petitions before

Hon'ble High Court. He also filed two stay applications before the

Hon'ble Rajasthan High Court, which was pleased to direct the

department to provide the same. Despite these directions the order

remains to be complied with till date.

2.1 All the additions were made in the hands of the father despite

assessee's statement that annexure A-1 belonged to son. Fathers

appeal travelled upto ITAT Jaipur which by order dtd. 29-10-1999

deleted the additions with a direction that the question of additions qua 4 ITA 681/JP/2012_ Sanjay Agarwal Vs. DCIT

annexure A-1 can be considered in the hands of the assessee by

following observations at internal page 12 & 12, para 14 of the order:

"In view of this facts and circumstances, we are of the view that first statement given by Shri Sanjay Agarwal should have been ignored and the statement given on a later stage should have been accepted and addition in the hands of Shri Sanjay Agarwal should have been made instead of making addition in hands of assessee. With these observations, we are of the view that addition made in the hands of assessee is not sustainable. Accordingly, we delete the entire addition in the hands of the assessee. The ground of the assessee is allowed and ground of the department is dismissed."

2.2 On this basis of these observations, notices u/s 148 were issued

on the assessee, which were complied with by declaration that original

returns filed may be considered as filed in response thereto. It was

inssited that annexure A-1 has not been provided to the assessee, all

these transactions were recorded on the regular books of accounts. AO

however without supplying the annexure A-1 as directed by Hon'ble

High court and ITAT framed the assessment making all these additions.

3. Aggrieved assessee preferred 1st appeal challenging the validity of

reassessment and on merits. Ld. CIT(A), however, upheld the

reassessment and awarded substantial relief on merits. Qua the non

supply of Annexure A-1, learned CIT(A) observed that, assessee 5 ITA 681/JP/2012_ Sanjay Agarwal Vs. DCIT

contention that these amounts are entered in regular books seized as

per Annexure A-1 cannot be accepted as it is not subject to examination

or verification at any stage since the same do not appear to be

available before AO. He therefore allowed substantial relief however

on estimate sustained the addition to Rs.1,03,075/-.

4. Now the assessee is before us challenging validity of 147/148

proceedings and on merits. Ld. Counsel for the assessee contends that

Ld. AO cannot initiate reassessment proceedings on borrowed

observation. ITAY did not direct that assessments should be reopened.

Assessee's case was not before ITAT, therefore, its direction in the

absence of assessee being a party to those proceedings, does not

constitute a direction. Besides it was well known to AO that seized

books of accounts in the form of annexure A-1 was not available, in this

eventuality proper satisfaction or belief cannot be arrived at to hold that

income has escaped assessment. Therefore, reopening is bad in law

and deserves to be quashed.

4.1 Apropos merits its vehemently argued that on several occasions,

Jaipur ITAT Bench adjourned the hearing directing the department to

produce the annexure A-1; which has not been produced so for and

department has expressed the inability to produce the same. Since the 6 ITA 681/JP/2012_ Sanjay Agarwal Vs. DCIT

alleged annexure A-1 is nowhere to be seen no addition on estimate in

reassessment proceedings can be made. Ld. AO and ld. CIT(A) both has

accepted the fact about missing annexure A-1 despite that additions

have been partly sustained. There can be no justification for any

addition based on material which is neither provided to assessee nor

before ITAT. Therefore on merits also the part retention of small

additions by ld. CIT(A) deserves to be deleted.

5. Ld. DR relied on the order of ld. CIT(A).

6. We have heard the rival contentions and perused the material

available on record. Apropos the validity of 147/148 proceedings we are

inclined to uphold the same as there were pertinent observation of the

ITAT. At the time of recording reasons and issuance of notice only

primary satisfaction is required. Sufficiency of reasons cannot be

examined at that stage as held by Hon'ble Supreme Court in the case of

Phoolchand Bajranglal 203 ITR 456. Therefore, this ground of the

assessee is dismissed.

6.1 Apropos the merits we find substance in the contention of

assessee's counsel. The fact that the alleged annexure A-1 did not see

the light of the day is admitted by the departmental authorities. The

reasons for estimated part retention of addition is done by putting a 7 ITA 681/JP/2012_ Sanjay Agarwal Vs. DCIT

burden in the assessee. In our view no addition qua an item emerging

from the incriminating material can be made unless the assessee is

given an opportunity, conforming to principles of natural justice, to

reconcile and rebut the same. Consequently we delete the all the

additions retained by ld. CIT(A). Assessee grounds on merit succeed.

7. In the result, the assessee appeal is partly allowed.

Order pronounced in the open court on 13/02/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 13th February, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Sanjay Agarwal, Bharatpur.

2. izR;FkhZ@ The Respondent- The DCIT, Circle- Bharatpur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr@ CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 681/JP/2012)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar