""
IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
. , ,
BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM
./I.T.A. Nos. 2807 & 2808/Mum/2010
( / Assessment Years: 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi Dy. CIT, Central Circle-2,
705, Sea Creast No. 2, / Mumbai
J. P. Road, Seven Bunglows, Vs.
Andheri (W), Mumbai-400 061
. / . /PAN/GIR No. ABVPN 7551 K
( /Appellant) : ( / Respondent)
/ Appellant by : Shri Rajiv Khandelwal
/Respondent by : Shri Girish Dave &
Ms.Kadambari Dave
/
: 09.09.2015
Date of Hearing
/
: 09.10.2015
Date of Pronouncement
/ O R D E R
Per Sanjay Arora, A. M.:
The assessee, an individual, is a Mumbai based interior designer. He, along
with his wife, Muskan Naqvi, was subject to search action u/s.132 of the Income Tax
Act, 1961 (`the Act' hereinafter) by the Investigation Wing (Mumbai) of the Revenue
at their residence, on 05.01.2007, as a part of the search operations on Hasan Ali Khan
(HAK) Group. The case was subsequently centralized with Central Circle-2, Mumbai
on 20.03.2007, and assessment for the different years framed u/s.153A r/w s. 143(3)
of the Act. We are in these appeals concerned with the assessments for assessment
years (A.Ys.) 2004-05 and 2005-06, made vide assessment orders dated 31.12.2008,
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
as modified by the Commissioner of Income Tax (Appeals)-6, Mumbai (`CIT(A)' for
short) vide his appellate orders, again of even date, i.e., 28.01.2010.
2.1 The first Ground for both the years is based on the same set of documents
found in search, tabulated as under, which has led to an addition for the following
year, i.e., A.Y. 2006-07, as well; the same having been confirmed in first appeal:
Sr. No. Reference to Seized material AY Amount APB pg.
1 Page no. 53 (*) 2004-05 1,41,742/- 113
2 Page No. 7 (*) 2005-06 10,90,507/- 66
3 Page No. 53 (*) 2006-07 3,03,237/- 113
4 Page No. 52 (*) 2006-07 40,824/- 112
Total 15,76,310/-
(*) of Annexure A1 to the Panchnama dated 06.01.2007. APB=>Assessee's Paper-
Book
2.2 It shall be relevant to reproduce the said documents, being the basis on which
the impugned additions have been made:
Pg. 53 of Annexure A1 (APB pg. 113)
Month Sale Add Less A Less Less Less Less Profit Loss Final Tot Mont
closing Purchase dv Expense Reject Commi Opening Balance al hly
Stock ssion stock
Upto Nov, 03 - - - - - - - - - - 141742 53 2674
Dec'03 to 667810 233408 563018 155200 2484 180516 251678 71 3545
May'05
June'05 97787 159982 37335 15354 0 0 233408 0 28328 223350 72 3102
July'05 25866 191026 24756 0 0 159982 32156 0 255506 73 3500
Aug'05 37170 163095 0 15226 0 0 191026 0 5987 249519 74 3372
Sept'05 19028 145640 17417 0 0 163095 0 15844 233675 75 3116
Oct'05 14339 146774 0 11085 0 0 145640 4388 0 238063 76 3132
Nov'05 63063 230784 62650 19249 146774 65174 0 303237 77 3938
Dec'05 57333 176957 420 22557 230784 19471 303237 78 3888
Pg. 52 of Annexure A1 (APB pg. 112)
Total to be received by mm @ 30%
given Total C/f balance
Profit Less Pr Less
3
ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
of
it
17.07.04 1000 June 04 to 120000 36000
Sept 04 6448 June'05 28328 8500 June 05 27500
July'05 32156 9646 July'05 37146
Aug'05 5987 1796 Aug'05 35350
Sept'05 15844 4753 Sept'05 30597
Oct'05 4388 1316 Oct'05 31913
Upto 32500 Nov'05 65174 19552 Nov'05 51465
Nov'05
Dec'05 19471 5841 Dec'05 45624
Dec'05 2000 Upto dec'05
Total = 34500 Taxes & other expenses 16000 4800 Bal till dec 40824
Pg. No. 7 of Annexure A1 (APB pg. 66)
"Munna Capital account as under:
Given Receipt
1.6.04 100000
3.7.04 50000
5.10.04 150000
at the time of
Dhiren's tran
Given to munna's person 5000
Munna P/F a/c
Given Receipt
To Pay
Up to end of Sep, 04 7448
17.7.04 1000
Sept, 04 6448
Upto Nov 05 32500
:-Company Position:-
Stock : 230000
Credit : 320000
Advance : 30000
Note
Now we will count from June 04 to Dec 05
consolidated a/c & consolidated profits
June 04 to may 05 1,20,000/-
32,156
04,388
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
65,174
2,21,718
Less Losses: 50,159
Upto Nov 05 1,71,559
Less taxes 10,000
1,61,559
Dec'05 ------------->
Proceedings before the Revenue authorities
3. Before the Assessing Officer (A.O.), the assessee's explanation was that the
said documents (as also others found and seized along with, viz. pg. 6 of Annexure A-
1/APB pg. 65), did not belong to him but to RDC World Wide, New Delhi (a
proprietary firm of one, Radhika Devi Choudhary), indicating payments made by the
said firm to one, Shri Bharat, a contractor. A certificate to the effect from the said firm
that he was working therewith from November, 2003 to November, 2005 (pertaining
to A.Ys. 2004-05 to 2006-07) was also produced (APB pgs. 35-36). Before the ld.
CIT(A), however, and in fact before the A.O. himself for A.Y. 2005-06, the assessee
admitted the said documents, also seeking to explain the same, admitting to only the
following incomes, working to a total of Rs.3.41 lacs, for being included (i.e., over
and above the returned income), as against an aggregate income of Rs.15.76 lacs, i.e.,
qua the said documents, added and sustained by the Revenue (refer para 2.1):
a) Unexplained investment of Rs.3,00,000/- for the AY 2005-06
b) Unaccounted profit in partnership business of Rs.30,000/- for the AY 2005-06
c) Unaccounted profit in partnership business of Rs.10,824/- for the AY 2006-07
The same did not find favour with the Revenue in-as-much as the assessee
gave conflicting statements even before the first appellate authority, so that the
additions stood confirmed as such, resulting in the present appeals before us.
Arguments
4. The parties were heard at length. We may at this stage, transcribe pg. 6 of
Annexure A1 (APB pg. 65), referred to during hearing, as under:
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
JT/AC 2 Non-ferrous Scrap
Month Sale Add Less Adv Less Less Less Less Opening Profit Loss Final
closing Purchase Expense Reject Comm Stock Balance
Stock
Dec, 03 to 667810 233408 563018 155200 2484 180516
May'05 (*)
June'05 97787 159982 37335 15354 0 0 233408 0 28328
July'05 25868 191026 24756 0 0 159982 32156 0
Aug'05 37170 163095 0 15226 0 0 191026 0 5987
Sept'05 19028 145640 17417 0 0 163095 0 15844
Oct'05 14339 146774 0 11085 0 0 145640 4388 0
Nov'05 63063 230784 62650 19249 0 0 146774 65174 0
Dec'05
(*) For Munna bhai's purpose, it will be counted @ 120000 since he invested from
June'04
The assessee's case before us was that once the documents found and seized
were owned up and sought to be explained by him, the addition/s in law could only be
made on that basis. That is, it was not open for the Revenue to not accept the said
explanation, i.e., except of-course for cogent reasons. The Revenue's case, on the
other hand, was that the explanation advanced is only in the absence of any link
between the same and RDC World Wide, i.e., as originally claimed and averred by the
assessee, who had thus in fact lied not only before the A.O. but also before the ld.
CIT(A). Falsus in uno, falsus in omnibus. On merits, i.e., of the explanation, there was
nothing to show that the documents or the transactions specified therein belong to a
partnership firm, in which the assessee claims to be a partner with 30% share, so that
he is liable to tax only on his share. The explanation is again incomplete in-as-much
as the assessee has not divulged either the name of the partnership; its address and
business, nor the names of the other partners, whereby only the truth of the assessee's
explanation, and thus its veracity, could be ascertained. The same is, thus, merely a
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
make-believe, and the Revenue not obliged to accept the same, so that it, in not doing
so, is in the right.
Findings
5. We have heard the parties, and perused the material on record.
5.1 Our first observation in the matter is that the assessee though admitting to a part
of the assessed income (refer para 3), yet impugns the entire additions made per his
appeal/s, which thus could at best be only partly allowed.
5.2 The Revenue's stand in not accepting the assessee's explanation of the seized
documents (or the transactions stated therein) as reflecting payments by RDC World
Wide, his `employer', is tenable in law. There is neither any mention nor an iota of
evidence linking the said firm with the documents found, being essentially statements
profiling the trading profit/profit. Section 292C of the Act also provides a statutory
presumption as to the truth of the contents of such documents, i.e., as found in search
or survey. The plea of the same as having been left by some visitor is again untenable,
being without any basis in fact or in law. In fact, these explanations are of no
consequence in view of the assessee's subsequent acceptance - he admitting the same,
seeking to explain the entries therein. Whatever thus may have been the assessee's
earlier stand or endeavor, his subsequent explanation cannot be rejected outright
merely for the reason that the first one was found as not valid. It is open for the
Revenue to adjudicate the same on merits, rejecting the subsequent explanation as
well. Reference in this regard may be made to the decision Prabhavati S. Shah vs. CIT
[1998] 231 ITR 1 (Bom). The legal maxim of falsus in uno, falsus in omnibus, as
explained by the higher courts, cannot be considered to have the status of a rule of
law, much less an inflexible one, but is only a rule of caution. In fact, as explained in
Ugar Ahir vs. State of Bihar, AIR 1965 SC 277, 279, it is neither a sound rule of law
nor a rule of practice. The matter, as apparent, is purely factual, i.e., whether the
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
assessee has been able to satisfactorily explain the source of the investment in a joint
business, the profits of which have admittedly not been disclosed, even post search.
That is, has he discharged the burden of proof cast on him on the basis of the material
found, particularly considering the statutory presumption of s. 292C of the Act, or not.
Toward this, we find that the documents are self-evident and corroborative,
establishing their truth or of their representing actual transactions, with the figures
therein in agreement, both internally as well as in relation to each other. PB pg. 113 is
a statement of the trading account, month-wise. The last two columns appear to be
that of the number of transactions and the profit per transaction respectively. The
same though is not relevant in view of our concern being with the figure of profit (or
loss). Likewise APB pg. 112 lists the fraction of the monthly profit (or loss), reckoned
at 30%, stated to be the assessee's share therein (as a partner in a partnership firm, to
which the said profit is stated to belong or is earned through). APB pg. 65 is again a
trading account, tabulated for different months; its figures matching with that per PB
pg. 113. APB pg. 66 is in respect of the assessee's account, ostensibly in the books of
another.
Analysis
5.3 The economic activity generating profit, as it appears from the account and its
constituents, i.e., purchase and sale and the mention of the item, is trading in non
ferrous scrap (refer PB pg. 65). The assessee's claim of having joined a partnership/
venture from June, 2004, is evidenced by the credits to his capital account beginning
01.06.2004 at Rs.1 lac/PB pg. 66; there being no balance in his account prior thereto.
This gets also corroborated by the note mentioning of the profit of Rs.1,80,516/- (i.e.,
Rs.1.80 lac approximately), to be, for the purpose of Munna Bhai (stated to be the
assessee's nick name), taken at Rs.1,20,000/-, i.e., corresponding to the period for
which he is a partner. As explained by the ld. Authorized Representative (AR), the
assessee's counsel, the profit of Rs.1.80 lacs is for the 18 month period, i.e., from
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
December, 2003 to May, 2005, as stated in the document itself, so that the profit for
the 12 month period (June, 2004 to May, 2005) would be at Rs.1.20 lacs. That Munna
Bhai is the assessee's name, is in agreement with the document and the narration
therein; the assessee would, after all, be interested only in his account. Further, the
other documents found during search also confirm his name as Munna Bhai (APB
pgs. 63, 136, 143, 144), with in fact it being the accepted position between the
assessee and the Revenue, the other additions being also made with reference to that
name only.
Decision
5.4 The next question thus would be the amount assessable in the assessee's hands.
APB pg. 112 clearly states of the share of profit (to be received by mm, i.e., the
assessee, at the rate of 30%). This, in fact, gets also confirmed by the working, in
hand, totaling on the side, the share of profit (taken at 30%) with Rs.1,20,000/-, i.e.,
the profit of the assessee (Munna Bhai) for the period June 2004 to May, 2005 (at PB
pg. 66). We, therefore, confirm the addition of the profit (including loss) as specified
for different months (from prior to November 2003 to December 2005) in the
documents, as falling to the assessee's share (30%), spanning over 3 years. The profit
of Rs.1,20,000/-, referred to at para 5.3, spreading over (first) two years, the same can
safely be taken at a uniform rate of Rs.10,000/- p.m. for the purpose of determining
the quantum of profit to be assessed for different years. No income other than the
same, i.e., on account of the profit/loss earned/suffered from such trading, is inferable
from the material on record. We say so as the Revenue has separately added the
cumulative profit (from Dec., 2003 to Dec., 2005) of Rs. 3,03,237/- (APB pg. 53).
The second category of addition would be for the capital invested in the
firm/entity (Rs.3 lacs, from June to October, 2004/APB pg. 66). For the balance
addition, how we wonder could, firstly, the same be added, much less in the assessee's
hands - the same being undoubtedly the figures of stock, credits and advances,
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
aggregating to Rs.5.80 lacs, of the `company'. We accordingly confirm the addition of
Rs.3,00,000/- on account of capital invested, being admittedly unexplained, the entire
of which falls in A.Y. 2005-06. We may here though clarify that when we hold so, we
are not in any manner confirming the existence or otherwise of a partnership firm, for
which there is no evidence as such, but only of an economic activity, in the form of
trading in non-ferrous (scrap), the assessee's share in surplus (or deficiency) from
which is at 30% - nothing more and nothing less. In fact, the law (Act) does not
recognize a partnership firm unless the same is evidenced by an instrument, with
specified shares, certified copy of which is furnished to the A.O. We decide
accordingly, disposing the sole ground of appeal for A.Y. 2004-05 and Gd. 1 for A.Y.
2005-06, and the assessee gets part relief.
6. Ground # 2 for A.Y. 2005-06 relates to an addition in the sum of Rs.30 lacs on
the basis of a MOU (Memorandum of Understanding) between the assessee and one,
Mr.Nirmal Daftary, found from the assessee's residence (as Annexure A1 to the
Panchanama dated 06.01.2007/APB pgs. 75-76) during search and seized. The
contents thereof are relevant, and reproduced as under:
`MOU
This MOU (memorandum of understanding) is drawn between Mr. Nirmal
Daftary and Mr. Abbas Naqvi, both of Bombay.
Following are the terms & conditions of the MOU:
1) Mr. Naqvi & Mr. Daftary will jointly invest in the business of Imports-
Exports, of various products.
2) The ratio of investment:
Mr. Nirmal Daftary: Between 45 & 50%
Mr. Abbas Naqvi: Between 45 & 50%
3) The type of investment:
Mr. Nirmal [L/C + Bank] Total of Rs.40-50 lacs.
Mr. Naqvi: Total of Rs.45-50 lacs.
4) Expected turnover with the same investment:
1st Year 1CR to 1.5 CR
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
2nd year 2CR to 2.5 CR
3rd Year 3CR
5) Expected profit before taxes:
App. 10% to 12% nett:
1st year @ 12% - 18 lacs App.
2nd year @ 12% - 25 lacs App.
3rd year @ 12% - 30 lacs App.
6) Division of profit:
It has been agreed by and between above two parties that it will be divided
as under, after making provision for taxes.
Mr. Abbas Naqvi 35% (as he will be a sleeping partner)
Mr. Nirmal Daftary 65%
7) Mr. Abbas Naqvi has already invested Rs.30 lacs from Nov'04. He will
invest another Rs.20 lacs by the 15th of January'05
8) There is a proposal of MNC's giving us business of imports for them,
terms and conditions of which will be separately decided with them. After
deducting commissions, profits will be divided by & between the above
two parties, in the same ratio.
9) Present business constitutes of imports of tools, abrasives & metal
powders.
10) Any expansion in the above will be jointly decided by the above two
partners.
11) Rs.25,000 (Rs. Twenty five thousand) will be paid every month to Mr.
Abbas Naqvi as a part payment towards his share of profit.
12) A/c's will be done at the end of December. Every year, beginning
January' 05.
Signed - Mr. Abbas Naqvi:
- Mr. Nimal Daftary:'
[emphasis ours]
The assessee, on being called upon during the assessment proceedings to explain
the source of Rs.30 lacs, stated to have been invested by him vide clause 7 of MOU,
denied having paid any such sum in-as-much as he did not have the said amount.
True, an understanding was arrived at and sought to be implemented, but did not
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Syed Ahmed Abbas Naqvi
materialize. This was also evident from the fact that the document (MOU) was
unsigned and undated. Nirmal Daftary was also examined on oath (on 24.12.2008)
u/s.131 of the Act in this respect (APB pgs. 118-119). He reiterated the same, stating
his refusal to make the assessee a partner in the venture, which was insisted upon as a
condition for investing, for the failure of the deal, i.e., to get going. On being further
questioned as to why in that case it was specifically stated in the MOU that the
assessee had already invested the said sum from November, 2004 (Q. No. 12 of the
statement), he would submit that this was as the assessee was ready with the money,
but in view of the afore-stated issue, the deal did not materialize, as happens
generally. The said explanation did not find favour with the Revenue, so that,
aggrieved, the assessee is in further appeal.
7. Before us, the case of both the parties was the same. The ld. AR would
emphasize on the document (MOU) being unsigned and undated, so that it represented
merely a proposed agreement, which was to be put through, i.e., actually executed, but
did not. Further citing an example of where a draft agreement is prepared for its
registration, stating of money having been paid/exchange hands. In practice, however,
it is not so, and the money is actually parted with only on the signature on the
Agreement at the time of its registration. The ld. DR would, on the other hand, submit
that a note-book was also recovered during search from the assessee's residence. The
same, bearing the details of the purchase and sale of a trading business, was
subsequently confirmed by Nirmal Daftary as belonging to him and, in fact, written in
his own hand (in answer to Q. Nos. 7 & 8), even as he denies having any business
relation with the assessee, but as being only his friend (in answer to Q. No. 6). How
could that be? The statement, he would further submit, taking us through it (placed at
pages 118 & 119 of APB), is internally inconsistent, and that the two had a business
relationship is patent.
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
8. We have heard the parties, and perused the material on record.
The assessee and Mr. Nirmal Daftary, a businessman, have known each other for
long, i.e., 15 to 20 years; are admittedly friends, implying a relationship of mutual
trust and goodwill (refer answers to Questions 5 & 6 of the statement on oath u/s.131).
That they discussed business extensively, and in detail, envisaging its joint conduct,
with the assessee as an investor/sleeping partner, is apparent from the undisputed facts
and circumstances of the case. The recovery of Nirmal Daftary's note-book,
containing the details of the business, found at the assessee's residence during search,
further establishes this. This is also borne out by the MOU and, in fact, admitted
thereby. The fact of a joint business being in contemplation is again admitted. To what
effect or purport, then, the argument of the document being not signed? The plea of
the document being unsigned and undated is, in view thereof, as also of s. 292C of the
Act, casting a statutory presumption as to the truth of the contents of any document
found during search or survey, of no moment.
The only issue is as to whether the assessee had already invested the
impugned sum of Rs.30 lacs, i.e., as stands stated in the MOU, or was only in
contemplation. Toward this, the document is to be read as a whole, and in the
backdrop of the facts and circumstances of the case, even as in view of section 292C
the onus to disprove the same or dislodge the presumption of truth of it's contents is
on the one who so alleges. Every detail of the joint business has been, as apparent,
thought out, including the investment; its financing; turnover; profitability; the
division of the profit amongst the two partners, etc. The accounting period as well as
the manner of disbursement of profit to the assessee, a silent/sleeping partner, has also
been agreed upon and stands clarified. The business is of import & export, with the
imports being of tools, abrasives and metal powders, i.e., the same category of trade
Import and Export of stone cutting tools, in which Mr. Nirmal Daftary already is
(refer APB pg. 118). The document itself bears, as would be apparent, a clear
reference to dates. As we infer, the business had already commenced in November,
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Syed Ahmed Abbas Naqvi
2004, if not earlier, with the note-book containing the details thereof. The business is
of trading, so that there was no reason to delay it once the investment starts pouring
in. The assessee was to invest Rs.45-50 lacs. Rs.30 lacs had already been invested
from November, 2004 onwards, and the balance Rs.20 lacs was to be invested by
15.01.2005. How could, then, it be said that no amount had in fact been invested, or
that the arrangement had not actually materialized? Clearly, the question of
investment of the balance Rs. 20 lacs would arise only if Rs. 30 lacs had already been
paid and received! That is, the figure of Rs. 20 lacs being the balancing figure, comes
into reckoning only once some amount (Rs. 30 lacs in the instant case) stands already
paid/invested. The assessee's case gets in fact impugned even on the basis of Mr.
Nirmal Daftary admitting (on oath) to the assessee having the money in readiness,
implying he being in possession thereof, though did not part with it as he (Mr.
Daftary) did not accept the condition of the assessee being taken in as a partner. The
argument is frivolous, if not specious, in-as-much as that in fact is the primary
condition for the conduct of the business, disagreement on which would have the
effect of scuttling the proposition at the threshold, while MOU would stand to be
reduced in writing only on an agreement on all major issues, and on the verge of the
commencement of the business and, rather, as it appears in the present case,
subsequent to its' commencement from Nov., 2004, or perhaps even earlier. The ld.
AR, on this being observed by the Bench during hearing, would submit that the
assessee did not have any money, as shall also be evident from the books of account
produced during the assessment proceedings. On what basis then, it was asked, could
he think of investing, much less in terms of being an investor/sleeping partner?
Through borrowings perhaps, was his reply. The financing arrangement, it escapes
him, stands in fact stipulated at cl. 3 of the MOU itself, with the bank borrowing and
the non-fund based financing to be arranged by Mr. Daftary, while the risk (owner's)
capital is to the account of the assessee. The same put pays and, in fact, disproves the
argument, which is only a bald statement. We have in fact already seen in the context
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Syed Ahmed Abbas Naqvi
of Ground # 1 the assessee to have invested in another business of trading in non-
ferrous scrap, also earning profits there-from, both admittedly undisclosed to the
Revenue. Clearly, the assessee has access to source/s of income, which is not
disclosed. It may well be or also include his regular profession (of interior designing),
fetching him returns/income far higher than that he chooses to disclose he returning
an income of Rs.1.25 lacs for the current year. Leave alone investing, it would be
extremely difficult for one to survive in Mumbai on that income. Again, the accounts
are to be settled after the year-end, and the assessee is to only get a small fraction of
his share on a monthly basis (Rs.25,000/-). Surely, a person subject to interest, which
is usually charged on a monthly/quarterly basis, would seek repartition of profit to that
extent so as to meet the interest obligation. How, in its absence, one may ask, would
the interest on the admitted proposed investment of Rs.50 lacs be discharged? The
same, is again, a bald statement, completely inconsistent with the facts and
circumstances of the case.
Coming to the contention of the arrangement being not executed, the same is
misplaced. The Revenue has not added any income by way of profits of the said
business, for us to dwell on that aspect of the matter. The only issue in dispute is if the
assessee had indeed invested Rs.30 lacs, the sum specified in the document (MOU) as
having been already invested, i.e., as on the date on which the MOU was reduced in
writing, and which could theoretically be anytime between November 2, 2004 to
January 14, 2005. It could be that the assessee had also invested the balance Rs.20
lacs, as is likely, or perhaps did not. We say likely, as, why, where not so, did the
assessee preserve the afore-referred note-book as well as the document itself, if the
arrangement had, for some reason, failed, and not actually carried out? A holistic and
contextual reading of the MOU, together with the facts and circumstances of the case,
clearly points to an arrangement which had been put in place, being on for some time,
and there is no merit in the argument that when the Revenue considers an investment
of Rs.30 lacs to have been made by the assessee in the business, it is not reading the
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Syed Ahmed Abbas Naqvi
said document as one whole. It may well be that the business, though envisaged on a
continuing basis (refer cl. 12 of MOU), did not continue for long, and was stopped
subsequently, but that is a matter with which we are not concerned with.
Whichever way, thus, one may look at it, the assessee's case is without basis,
unsubstantiated by and de hors any document or even circumstantial evidence/s,
which rather point to the contrary, as does the clear language of the document itself.
Section 292-C of the Act is a rule of evidence, clear in its import. Under the
circumstances, we, in view of the foregoing, are in complete agreement with the
Revenue of the impugned sum of Rs.30 lacs as representing an investment by the
assessee in a joint venture with Mr. Nirmal Daftary, the source of which being
unexplained would stand to be deemed as unexplained income u/s. 69, also drawing
support for the purpose from the decision in Surendra M. Khandhar vs. Asst. CIT
[2010] 321 ITR 254 (Bom). We, accordingly, confirm the same, dismissing the
assessee's relevant ground.
9. The third and the final ground of appeal for A.Y. 2005-06 is qua an addition in
the sum of Rs.3,60,000/- based on a seized document (Pg. 8 of Annexure A-3 to the
Panchanama dated 06.01.2007/APB pg. 135). The same is in respect of notings in a
diary bearing different dates of the calendar (on the leaf dated 12.01.2005), listing the
payments made to different contractors on account of one, Dimple, as well as
payments received from her, the same being found reflected in the assessee's books of
account. Before the Assessing Officer (A.O.), the assessee's explanation was that the
said notings relate to payments received from Ms. Dimple Athawali, Lokhandwala, a
client, as well as disbursements made to the different contractors, for and on behalf of
the RDC World Wide, New Delhi for the interior work undertaken for the said client.
The same did not pass muster as the assessee could not establish any nexus between
the said document and RDC World Wide (RDC), so that the document belonged to
16
ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
and the payments were made only for and on behalf of the assessee, also adverting to
section 292C of the Act.
In appeal, the ld. CIT(A) noted that, firstly, no written submissions were filed by
the assessee in respect of this addition. Two, neither there was any mention of RDC
on the said or even in any allied document nor did the assessee furnish any
confirmation from the same so as to link the said firm with the transactions under
reference. There was, in fact, no confirmation even from any contractor as well. The
assessee being thus unable to improve his case in any manner, the addition stood
confirmed by the ld. CIT(A) relying on the decisions by the Hon'ble High Court in the
case of Surendra M. Khandhar (supra) and Fifth Avenue vs. CIT [2009] 319 ITR 127
(Kar), besides on section 292C of the Act in-as-much as the assessee had failed to
rebut the presumption mandated thereby. Aggrieved, the assessee is in second appeal.
10. Before us, the ld. AR would take us through another seized document (Pg. 54 of
Annexure A1 / APB pg. 115), which reads as under:
`Date: 02.06.2005
Dimple & Samit (Lokhandwala)
1) Suresh Mistry 70,000/-
2) Tiles 44,000/-
3) Plumbering 35,000/-
4) Electric works 25,000/-
5) Carpenter (Chand) 45,000/-
6) Amarnath Painter 25,000/-
Total 2,44,000/-
Less 75,000
40,000 1,30,000/-
15,000
1,14,000/-'
The same is, he would continue, again, a statement drawn on the letter head of
Annya Constructions, the assessee's proprietary concern, as on 02.06.2005, of
payments made to different contracts on account of Ms. Dimple Athawali,
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
Lokhandwala, as well as total amount received there-from. The figures therein
completely match the figures stated in APB pg. 135 supra, save for a minor difference
of Rs.1,000/-, substantiating the assessee's stand, i.e., of the same as being payments
made in respect of interior work for a client, Dimple Athawali, to different
contractors. The assessee had only acted as a consultant, overseeing the work, and
made disbursement of the amount received to different contractors engaged for
carrying out different works. How could, thus, there at all be any addition in the
assessee's hands, who is only entitled to his professional charges? Again, only the net
amount paid could, in any case, be considered as the assessee's income, he conceded,
when asked about the source of the payments to the contactors, while reiterating the
same (payments) as having been made by and on behalf of RDC. The ld. DR would
also reiterate the Revenue's case of the absence of any nexus of the said documents
with RDC, though could not show the two documents, i.e., APB pgs. 115 and 135, as
not referring to the same set of transactions.
11. We have heard the parties, and perused the material on record.
There is no merit in the assessee's contention of the payments as having been
made by RDC which assertion is wholly unsubstantiated or uncorroborated by any
other material. The documents, thus, one of which (APB pg. 115) is on the letter-head
of the assessee's proprietary firm, Ananya Constructions, are only of the assessee. The
assessee has made a total payment of Rs.2.45 lacs over a period, receiving Rs.1.30
lacs from the client during the same period, so that the balance Rs.1.15 lacs is
receivable from the client. As the dates of both the payments and the receipts are not
available, the assessee would have to be, giving him the benefit of doubt, necessarily
allowed credit in respect of the entire amount received, so that the balance amount
receivable (Rs.1.15 lacs) was not exceeded at any given point of time, as where the
assessee had effected payments, net of that received from the client, in a sum higher
than Rs.1.15 lacs at any time covered by the said period. The source of the said
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
payment being unexplained in-as-much as neither are the said payments reflected in
the assessee's accounts nor shown before either authority, we confirm the addition of
Rs.1.15 lacs outstanding for being received as on 02.06.2005, on account of payments
made by the assessee to different contractors. We are conscious that the assessment
year under reference is A.Y. 2005-06. However, it is clear that the payments are made
not on a single day, but over a period, toward charges for services rendered,
beginning, presumably 12.1.2005, to 02.6.2005, i.e., the date on which the final
statement of outstanding was drawn. The Revenue has made an addition for the
succeeding year as well, based on the same document (APB pg. 115), agitated vide
Gd. # 2 for A.Y. 2006-07. Two additions cannot obviously be made for the same
payments. The work being undertaken on an ongoing basis, we have no basis to
determine the amount outstanding from the said client as on 31.3.2005, i.e., in the
absence of date-wise detail of the amounts paid and received over the said period.
Under the circumstances, we only consider it proper to assume (net) payments on a
uniform basis. The net excess payment of Rs.1.15 lacs would, accordingly, stand to be
allocated between the two different previous years, being f.y. 2004-05 and f.y. 2005-
06, during which the transactions have seemingly taken place, on the basis of time
period, i.e., assuming a uniform accumulation of the said balance of Rs.1.15 lac over
time. We decide accordingly, disposing the relevant ground of appeal.
12. In the result, the assessee's appeals are partly allowed.
Order pronounced in the open court on October 09, 2015
Sd/- Sd/-
(D. Manmohan) (Sanjay Arora)
/ Vice President / Accountant Member
Mumbai; Dated : 09.10.2015
. ../Roshani, Sr. PS
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ITA Nos. 2807 & 2808/M/10 (A.Ys. 2004-05 & 2005-06)
Syed Ahmed Abbas Naqvi
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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