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ACIT, Central Circle-09, ARA Centre, Jhandewalan Extn., New Delhi Vs. Anil Khandelwal, G-40, Saket, New Delhi.
July, 25th 2014
             IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCH: `A' NEW DELHI

            BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
                              AND
             SHRI T.S.KAPOOR, ACCOUNTANT MEMBER

                    I.T.A .Nos.-5516 & 5517/Del/2012
                (ASSESSMENT YEARs-2006-07 & 2007-08)

         ACIT,                          vs         Anil Khandelwal,
         Central Circle-09, ARA Centre,            G-40, Saket, New Delhi.
         Jhandewalan Extn., New Delhi              PAN-AAKPK8113G
         (APPELLANT)                               (RESPONDENT)

                 Appellant by:        Smt. A.Misra, CIT DR
                 Respondent by:       Sh. Ved Jain, CA

                                      ORDER
PER DIVA SINGH, JM

      These are two appeals filed        by the Revenue against the order dated
28.03.2013 of CIT(A)-XXVIII, New Delhi pertaining to 2006-07 & 2007-08
assessment years. Both these appeals are being decided by a common order as it
was a common stand of the parties before the Bench that identical grounds have
been raised by the Revenue in both the years and the facts, circumstances and
the arguments are identical except           for the difference in the amounts.
Accordingly the joint stand of the parties has been that the arguments advanced
by both the sides in ITA No-5516/Del/2012 for 2006-07 assessment year would
cover both the years.
2.    The grounds raised in ITA No-5516/Del/2012 are reproduced hereunder
for ready-reference:-
      "1.    That the Commissioner of Income Tax (Appeals) erred in law and on
      facts of the case in deleting the addition of Rs.27,00,000/- (in ITA No-
      5517/Del/2012 the amount is Rs.1,14,80,000/-) made on account of peak
      amount of unexplained cash.
                                     2                     I.T.A .No.-5516 & 5517/Del/2012


       2(a) The order of the CIT(A) is erroneous and not tenable in law and on
       facts.
       (b)    The appellant craves leave to add, alter or amend any/all of the
       grounds of appeal before or during the course of the hearing of the appeal."

2.1.   The relevant facts of the case as borne out from the assessment order are
that the search & seizure action was conducted on 12.12.2006 at the business and
residential premises of Shri. S.K.Gupta alongwith various concerns in which he
and his family members were interested. Similarly action u/s 132 of I.T. Act,
1961 is stated to have been conducted in the case of various companies owned or
controlled by him and also in the case of different individuals connected with the
said companies. The present assessee as per the assessment order is one of these
companies covered under search & seizure action.
2.2.   Consequent to the search action, notice u/s 153A of the Income Tax Act,
1961 was issued to the assessee on 24.10.2008. A perusal of the assessment
order shows that the AO records that the assessee is an individual who had filed
return of income in response to notice u/s 153A of the Income Tax Act, 1961 on
05.11.2008 at Rs.1,54,343/-. He required the assessee in the course of the
assessment proceedings u/s 143(3) r.w.s 153(A) to give information as per
question no.10.2 & 10.3 of the questionnaire dated 07.11.2008 in regard to the
transactions of the assessee and the family companies/concerns relatable to the
documents seized during the course of search in S.K.Gupta Group of cases. He
specifically confronted the assessee with the extract of page 25 of Annexure A-1
of party A-5 seized during the course of search and seizure operation in
S.K.Gupta Group of cases at H-108, 2nd Floor, New Asiatic Building, Connaught
Place, New Delhi. The reply of the assessee thereto however was not accepted
by the AO which resulted in the addition of Rs. 27,00,000/-.
2.3.   Similarly in 2007-08 A.Year pursuant to a similar notice u/s 153A return
declaring an income of Rs.1,82,556/- was filed by the assessee. The AO after
                                 3                  I.T.A .No.-5516 & 5517/Del/2012





issuance of notice etc. confronted the assessee with question No.10.1 requiring
him to explain the entries in the seized documents in "S.K.Gupta Group of
cases" where the assessee's name appeared. The documents described as party
Page -5 Annexure A-33 is extracted in the assessment order. Herein also the
reply of the assessee was not accepted by the AO who proceeded to make the
addition.
3.     Aggrieved by this the assessee went in appeal before the CIT(A) in both
the years. The CIT(A) considering the submissions advanced on behalf of the
assessee deleted the additions made in both the years.    Aggrieved by this, the
Revenue is in appeal before the Tribunal on the afore-mentioned ground in both
the years.
4.     The Ld. CIT DR inviting attention to the assessment order referring to the
observation made therein submitted that Sh.S.K.Gupta has admitted that he was a
entry provider as a result of which the AO vide para 3.2 has proceeded to make
the addition. The extract of hand ledger account of Sh. Anil Khandelwal i.e the
assessee available at pages 30-33 of Annexure A-31 of party A-5 which was
seized during the course of the search and seizure operation in S.K.Gupta Group
of cases it was submitted has been extracted in the assessment order. It was
submitted that the reply thereto of the assessee has been considered by the
Assessing Officer and despite this fact the addition made has been deleted by the
CIT(A), accepting the arguments advanced on behalf of the assessee and cross-
examination referred to by the CIT(A).
4.1.   Referring to the same it was her submission that the questions put forth
were very vague and full facts have not come out in the order as such it was her
submission that the issue should be restored to the AO and the impugned order be
set aside. In order to support her assertion that answers to vague questions have
been considered, attention was invited to page 16 of the impugned order wherein
                                 4                   I.T.A .No.-5516 & 5517/Del/2012


vague responses to vague questions of Sh. S.K.Gupta have been relied upon in
the cross-examination.    Specific attention was invited the response given to
question   No.-14 & 15.     Accordingly on the basis of the same it was her
submission that infact the addition made by the AO deserves to be upheld as the
reasoning taken into consideration for deleting the addition are not relevant. It
was also her submission that since the reasons for making the addition and
deleting the addition in 2007-08 are identical the arguments advanced in 2006-07
assessment year would fully apply in equal force to 2007-08 A.Year also and no
separate arguments are required to be made.
5.    The Ld. AR on the other hand heavily relied upon the impugned order.
Supporting the same it was his submission that in the facts of the present case
there is no allegation that either funds have been moved from the assessee to
Sh.S.K.Gupta Group of companies who has issued cheques to the assessee nor is
there any evidence that any cash was paid to the assessee by Sh.S.K.Gupta.
Referring to the cross-examination of Sh.S.K.Gupta it was his submission that the
cross-examination as the impugned order would show was in the presence of the
AO and till date there is no statement by Sh.S.K.Gupta that he has ever received
any cash or paid any cash to the assessee. The mere argument that he is an entry
provider without any evidence was assailed. Referring to the specific questions
14 & 15 to which the Ld. CIT DR drew attention it was his submission that
infact this is an extract from the statement of Sh. S.K.Gupta which was made at
the time of search recorded on 13.12.2006 and is not a part of the questions put in
the cross examination. Accordingly it was his prayer that since apart from
making general and vague submission not borne out from the record, there is no
concrete argument assailing the impugned order, the departmental appeals in the
absence of any contrary fact or evidence deserves to be dismissed.
                                  5                   I.T.A .No.-5516 & 5517/Del/2012


5.1.    It was further submitted by him that although the issue is purely factual
and relief is warranted on facts alone he would still in order to support the
impugned order rely upon the judgement of Bombay High Court in the case of
ACIT vs Lata Mangeshkar 97 ITR 696. Specific attention was invited to para 6
thereof for the proposition that the Court even where there was a statement of a
managing partner that he had made payments to the singer in "black" even in
such a situation, it was held by the Hon'ble High Court that suspicion cannot
take the place of proof.
5.2.    Reliance was also placed upon the decision of the Delhi Bench in the case
of     DCIT vs Yashpal Narender Kumar in ITA No-5340 to 5342/Del/2012
wherein by their order dated 07.02.2013, it was held by the Bench that addition
on the basis of statement of the third party without any corroborative evidence is
not tenable. Copy of the said order was also filed in the Court. It was argued
that the department having used the ultimate weapon namely search and having
failed to find any evidence against the assessee in the circumstances, it was
contended that the arguments made without any evidence have no relevance. A
perusal of the same shows that it was emphasized that it has been held therein
that presumption u/s 132(4A) is only against the person in whose possession the
search material is found and not against any other third person. Considering the
judicial precedent    it was held     that the presumption is rebuttable and not
conclusive and it cannot be applied to the third party in the absence of
corroborative evidence as it goes without saying that the presumption available
u/s 132(4A) can be drawn only against the person in whose case search is
authorized and from whom and from whose possession or control books of
accounts dairy or documents are found and presumption regarding correctness of
the contents of the books of accounts etc cannot be raised against the third party.
                                     6                     I.T.A .No.-5516 & 5517/Del/2012


5.3.   Reliance was also placed upon CIT vs Ved Prakash Chaudhary reported in
305 ITR 245 (Delhi). Attention was invited to paras 12 & 13 thereof so as to
contend that in the facts of the present case also no case had been made out to
show that there was a transfer of money between the assessee and S.K.Gupta
Group of Companies.         The said judgement of the Delhi High Court it was
submitted was confirmed by the Supreme Court as SLP filed against the said
judgement was dismissed not only on grounds of delay but also on merit. Copy
of the dismissal dated 09.01.2009 was filed. Accordingly on the basis of this fact
it was his submission that the impugned order deserves to be upheld.
5.4.   The Ld. CIT DR in reply reiterates that the issue is factual and full facts are
not coming out. Referring to page 15 of the impugned order which contains an
extract from the statement of Sh.S.K.Gupta. It was her request that the issue may
be restored.
6.     We have heard the rival submissions and perused the material available on
record. Before addressing the issues it would be appropriate to refer to the
specific observations made in the assessment order which led to the addition
being made on which heavy reliance has been placed by the Ld. CIT DR:-
       3.     "Transactions of the assessee and his family companies/concerns as
       per the documents seized during the course of search in S.K.Gupta Group
       of cases:-

       In this connection, the assessee was asked to give information as per
       question no.10.2 & 10.3 of the questionnaire dated 07.11.2008 as under :-

       10.2. During the course of search and seizure operation in S.K.Gupta
       Group of cases at H-108, 2nd Floor, Nes Asiatic Building, Connaught Place,
       New Delhi, a hand ledger has been seized as per Annexure A-31, in which
       your account is reflected at page 30 to 33 of the said annexure. The extract
       of the same is reproduced hereunder for your explanation and giving nature,
       details and source of the entries mentioned therein. It is worth mentioning
       that name of certain companies in which you, your family members and your
       relatives are interested, are appearing in this account.
                                    7                    I.T.A .No.-5516 & 5517/Del/2012


       Extract of hand ledger account of Shri Anil Khandelwal in page 30-33 of
       Annexure-A-31 of party, A-5, seized during the course of search and
       seizure of operation in S.K.Gupta Group of cases at H-108, 2nd Floor, New
       Asiatic Building, Connaught place, New Delhi.
Page-30
Date            Particulars                     Debit          Credit         Balance
28-7-05         Cash Received                                        100000        100000
28-7-05         North-SNG 361473 PO (HDFC            500000                        500000
29-7-05         Cash received                                         70000        700000
30-7-05        Hi-SNG (PO) 226953                    450000                       250000
30-7-05        Hamara-SNG (PO) 257803                250000                            0
30-7-05        Cash received                                        190000        190000
1/8/2005       BT (SCB)-SNG-                         200000                        10000
1/8/2005       Cash received                                         10000         10000
11/8/2005      Cash received                                       1000000       1000000
12/8/2005      Cash received                                        500000       1500000
13-8-05        SPG-SNG-002577UTI (PO)                600000                       700000
13-8-05        Swen SNG-153999                       700000                            0
13-8-05        Cash received                                        484000        484000
13-8-05        Swen 1+ 80285488 + 579231                            180000        180000
13-8-05        Swen 080252                                          180000        844000
13-8-05        Swen-716417                                           96000        940000




Page-31


17-8-05        Swen-SWG-160110                       500000                       440000
19-8-05        Era-PBN-SNG (PO)-535102               250000                       190000
19-8-05        SPG (HDFC)-SNG-160554                 250000                        60000
20-8-05        Godde-Swen-094622                                     96000         36000
20-8-05        V.K.Gadde Swen 0495804                                96000        132000
20-8-05        Swen-773190                                           96000        228000
               44XA.5 Chas                            71000
3/9/2005       Cash received                                                      250000
1/9/2005       Cash paid                               3860
                                   8       I.T.A .No.-5516 & 5517/Del/2012


2/9/2005    T&G ABG Bondwell (948929)   150000
            1.5 lacs X2%                  3000
3/9/2005    Swen Bond 160361            150000
5/9/20005   Bondwell SPG                              100000
            Cash paid                     140
2/9/2005    DD of Lingyas               500000
2/9/2005    Lingyas 1038399             900000
2/9/2005    Lingyas 038700              900000
2/9/2005    Lingyas 387010              900000
2/9/2005    Lingyas 038707              900000
2/9/2005    Lingyas 038073              900000




Page-32


2/9/2005    Lingyas 038704              900000
5/9/2005    Cash Received                             100000
6/9/2005    Bond-SPG TR                               300000
6/9/2005    Cash Received                             100000
7/9/2005    Cash Received                             650000
7/9/2005    Cash received                             650000
8/9/2005    Cash Received                             685000
8/9/2005    Cash Received                             515000
            Swen                                       21600
            Swen                                       21600
            Swen (21600X7)                            151200
            Swen (21600X4)                             86400
19-9-05     DD charges of 50 lac         75000
19-9-05     Cash paid                   205800
19-9-05     Swen-443167                                21600
19-9-05     Swen-623626                                21600
19-9-05     Swen-425371                                21600
19-9-05     Swen-464062                                21600
                                          9                     I.T.A .No.-5516 & 5517/Del/2012


19-9-05           Swen-396798                                               21600
20-9-5            Cash Received                                            400000
20-9-05           Cash paid                                  108000
21-9-05           Swen Pert 167292                           400000
26-9-05           Cash Received                                            500000
26-9-05           Hi bon fin 545463                          500000
28-9-05           Cash Received                                           1000000
30-9-05           SPG Bond finan 165711                      500000
3/10/2005         SPG Bond Finan 165712                      500000
3/10/2005         DMC Bond 709349                            500000
4/10/2005         Cash paid                                  500000
5/10/2005         Bond Finan North 43678                                   450000
7/10/2005         Swen bond 171180                           600000
10/10/2005        Bond Swen                                                600000


          10.3. During the course of search and seizure operation in S.K.Gupta
          Group of cases at H-108, 2nd Floor, New Asiatic Building, Connaught Place,
          New Delhi, a document has been seized as per page 25 of Annexure A-1, in
          which investment entries of companies controlled by Shri. S.K.Gupta is
          mentioned. The extract of the same is reproduced hereunder for your
          explanation and giving nature, details and source of the entries mentioned
          therein. It is worth mentioning that name of certain companies in which you,
          your family members and your relatives are interested, are appearing in this
          account.

          Extract of page 25 of annexure A-1 of Party A-5, seized during the course
          of search and seizure operation in S.K.Gupta Group of cases at H-108, 2nd
          Floor, New Asiatic Building, Connaught Place, New Delhi.

Sr. No. Date             Company name                       Cheq. No.   Amount
1          15-01-2005    Era Advertising & mark. Co.        470221      250000
2.         19-01-2005    Hightech Comvision Limited         190634      250000
3.         15-01-2005    North India Securities Pvt. Ltd.   820708      250000
4.         15-01-2005    P.G. Travels                       184215      250000
5.         03-04-2005    Glovextech                         401442      800000
6.         03.04.2005    Flovextech                         401443      500000
7.         03-08-2005    Cell Cell Technology               449110      1200000
8.         03-11-2005    Power Gold Electronics             685071      1200000
9.         19-03-05      Bolni Expenses                     561557      750000
10.        19-03-05      Power Gold Electronics             685073      1500000
11.        10-03-2005    S.K.Gupta Ji                       165712      500000
12.        10-03-2005    S.K.Gupta Ji                       709349      500000      7950000
                                      10                      I.T.A .No.-5516 & 5517/Del/2012



Bondwell Insurance Brokers
1       30-04-05       T.G.    Quality    &     Mamt. 596133         300000
                       Consultants
2       04-10-2005     S.K.Gupta                        319711       226000
3.      31-03-05       Era Advertising & Mkt. Pvt. Ltd. 472796       500000      1026000

E-Synergy Infosystem Pvt. Ltd.
1       17-01-05       Hitech Computech Pvt. Ltd.         190631     250000
2       17-01-05       North India Securities Pvt. Ltd.   820707     250000
3.      26-09-05       S.K.Guptaji                                   500000      1000000

Paradigm Advertising
1       22-01-05       P.G.Travels Pvt. Ltd. Quality & 184218        250000
                       Mamt. Consultants
2       22-01-05       Advertising Marketing Pvt. Ltd. 470222        250000      500000

       You are requested to explain your connection with the investing companies
       and investee companies(your companies), with reference to the books of
       account and other documents.

       3.1        In response thereto, the assessee has submitted following reply vide
       letter dated 23.12.2008 :

       10.2) The assessee has already submitted that the said page 30-33 of
       annexure A-31 of party A-5 found and seized from the premises of Sh. S.K.
       Gupta do not belong to the assessee or his family members and concern.
       The assessee has no concern what so ever in the entries recorded in the said
       page 30-33 of annexure-A-31 of party A-5 found and seized from the
       premises of Sh. SK. Gupta. It is submitted further that search was also
       carried out at the assessee 's residence and office premises. These entries do
       not corroborate with any documents seized or books of accounts found from
       the assessee's residential or office premises searched by Income Tax
       Department. Sir, it will be of great help in identifying and explaining the
       entries if the author of this documents is summoned for the cross
       examination.
                                                   (emphasis provided by the Bench)

       10.3) The assessee has already submitted that the said page 25 of annexure-
       A-1 found and seized from the premises of Sh. SK. Gupta do not belong to
       the assessee or his family members and concern. The assessee has no
       concern what so ever in the entries recorded in the said page 25 of
       annexure-A-l of party A-5 found and seized from the premises of Sh. S.K.
       Gupta. It is submitted further that search was also carried out at the
       assessee 's residence and office premises. Theses entries do not corroborate
       with any documents seized or books of accounts found from the assessee's
       residential or office premises searched by Income Tax Department. Sir, it
                              11                       I.T.A .No.-5516 & 5517/Del/2012


will be of great help in identifying and explaining the entries of the author of
this documents is summoned for the cross examination.
                                             (emphasis provided by the Bench)

3.2 The assessee's submissions made in response to the specific questions
asked on the basis of seized documents found during course of search in Sh.
S.K. Gupta Group of cases, is nothing but an evasive reply for the following
reasons:

(i)    The assessee has claimed to be a friend of Sh. S.K. Gupta, during the
course of statements.

(ii)  The assessee being a chartered accountant is auditor of various
companies of the concerns of Sh. S.K. Gupta.

(iii) The description of the entries on the seized documents as referred to in
question no. 10.3, very well indicates the specific names like Bondwell
Insurance Brokers, E- Synergy Infosystems Pvt. Ltd. and Paradigm
Advertising, which are the companies/concerns, in which assessee's family
members or relatives are interested.

(iv) So far as the entries as per documents referred to in question no. 10.2,, is
concerned, the same have been mentioned in the ledger account in the name
of Sh. Anil Khandelwal, assessee and it bears the name of Bondwell on
different dates. It also has pay order (P.O.) nos. clearly mentioned against the
name of companies like Swen, Era, Hitech, DMC, SPG etc, which forms the
part of Sh. S.K. Gupta Group of cases, so the assessee's claim that it has
nothing to do that this document is incorrect.

(v) In fact the assessee, has taken accommodation entries for his family
concerns/companies from tie concerns/companies of Sh. S.K. Gupta Group of
cases. For this purpose assessee has made cash payments and also paid
commission @ 2% which is very much evident from the entry dated
02.09.2005 at page 31 of annexure A-31 of Party A-5 seized during the course
of search and seizure operation in Sh.S.K.Gupta Group of cases.

(vi)   The assessee has made cash payments on various dates against which
the group companies of Sh. S.K.Gupta has issued pay orders, obviously
accommodation entries of investment. Even if it is considered that assessee
has acted as conduit for getting accommodation entries for his group of
companies by rotating the cash funds, the peak cash amount is worked out on
08.09.2005 at Rs.27,00,000/- (Rs. 1,00,000/- + Rs.1,00,000/- + Rs.6,50,000/-
+ Rs.6,50,000 + Rs.6,85,000/- + Rs.5,15,000/-) Since assessee has failed to
give any specific information alongwith confirmation from his group
companies/concerns who have taken accommodation entries from the group
companies/concerns of Sh.S.K.Gupta, this peak amount of Rs.27,00,000/- is
added to assessee's income as unexplained cash in the hands of the assessee.
                                     12                      I.T.A .No.-5516 & 5517/Del/2012


                                                              Addition Rs.27,00,000/-

6.1.   It is seen that the arguments advanced by the assessee in appeal before the
CIT(A) are set out in the para 2.2 of the impugned order on a consideration of
which the claim of the assessee has been allowed which has been assailed by the
Ld. CIT DR as not relevant. The submissions are extracted hereunder for ready-
reference :-
       2.2.   "As against the above action of the AO, the appellant made detailed
       submissions which are summarized hereunder:-

       1.      It is submitted on behalf of the appellant that , while rejecting the
       explanation of the appellant, the AO has made addition based purely on
       doubts, suspicion, conjectures and surmises, and without bringing in any
       cogent material on record. The AO alleged in the impugned order that the
       appellant has made cash payments on various dates against which the group
       companies of Sh. S.K. Gupta has issued pay orders, obviously accommodation
       entries of investment and has added the peak amount of Rs. 27,00,000/- It is
       quite evident that the AO has treated the alleged cash payments appearing on
       Page 32 of Annexure - A - 31 on 08.09.2005 as unexplained cash in the hands
       of the appellant and rebutted the contentions raised by the appellant on the
       basis that the appellant claimed to be a friend of Shri S. K. Gupta and that
       the appellant being a Chartered Accountant was the auditor of various
       companies of Shri S.K.Gupta. The other two reasons are that the seized
       documents mentioned specific names like Bondwell Insurance Brokers, E-
       Synergy Infosystems Pvt. Ltd. and Paradigm Advertising, which are the
       companies / concerns in which assessee's family members or relative are
       interested and that the seized document reflects ledger account in the name of
       Anil Khandelwal and Bondwell on different dates and also shows numbers of
       pay orders issued by Swen Group of cases.

       2. It is contended by the appellant that the appellant is a practicing chartered
       accountant and Shri S.K. Gupta is also a chartered accountant by profession.
       So, friendship between the two professionals can be possible. But mere
       friendship between the two chartered accountants cannot be basis of
       presumption that the said pages 30 to 33 of Annexure - A - 31 and Page 25 of
       Annexure - A - 1 seized from the premises of S.K. Gupta belonged to the
       appellant and sum appearing on the said pages were given by the appellant
       for taking accommodation entries.




       3. It is also contended that the allegation made by the AD that the appellant
       being chartered accountant is auditor of various companies of the concerns of
       Shri S.K. Gupta is not factually correct. The appellant in his submission
       categorically stated that he had not carried out any audit for Shri S.K. Gupta
                              13                      I.T.A .No.-5516 & 5517/Del/2012


in his personal capacity. No cogent evidence has been brought on record that
the appellant is the auditor of the companies/ concerns of Shri S.K. Gupta.

4. It is further contended that the appellant and his family members or
relatives are not interested in the said concerns except E - Synergy
Infosystems Private Limited. However, it is pertinent to note that M/s E -
Synergy Infosystems Private limited is a separate taxable entity and any
transactions mentioned on certain pages about the said company cannot be
treated as unexplained cash of the appellant. If any transactions related to the
said company and any other concern were found recorded in the documents
seized from Shri S.K. Gupta, the same cannot be added to the income of
appellant merely on the basis that appellant and his family members or
relatives are interested in those companies / concerns.

5. It is further contended that the AO himself alleged in the impugned order
that transactions are related to Bondwell Insurance Brokers, E - Synergy
Infosystems Private Limited and Paradigm Advertising. Hence, the said
transactions are not related to the appellant and that can never be considered
as evidence that. the appellant is taking accommodation entries in the said
companies / concerns. If the said companies / concerns have taken
accommodation entries, the same can be added in their respective hands by
initiating assessment proceedings under section 153C of the Income tax Act,
1961 as unexplained cash credit and not in the hands of the appellant. Instead
of doing that the AO erred in law by making addition in the hands of appellant
in respect of transactions related to other assessable persons instead or
invoking provision of section 153C of the Income tax Act, 1961.

6. It is further contended that the appellant had categorically requested for
photocopies of the pages 31 to 33 of Annexure - A - 31 and A - 25 of Annexure
- A - 1 seized from the premises of Shri S.K. Gupta during the course of
Search and seizure operation. However, AO did not provide the same and
made the impugned addition in violation of principles of natural justice.

7. It is also contended that copies of the said documents and statement of
Shri S.K.Gupta was provided by the AO during appellate proceedings in
March 2011 from which it is seen that the documents found and seized from
the premises of Shri S.K. Gupta did not have such clear cut evidence for
making addition in the case of the appellant and evidence relied upon was
vague and ambiguous. The alleged evidences are not related to the appellant
as the learned assessing officer also failed to bring any evidence on record
that Shri S.K. Gupta or other person has given statement or filed written
submission that the said pages are related to transactions with Shri Anil
Khandelwal, the appellant. Since, the said pages were neither accepted by
the appellant to be belonged to him nor Shri S.K. Gupta accepted that the said
transaction belonged to the appellant; the allegation made by the learned
assessing officer did not have any basis except doubt, suspicion, conjecture
and surmises. It is also pertinent to note that the cases of Shri S.K. Gupta
                                     14                      I.T.A .No.-5516 & 5517/Del/2012


       Group were also assessed by the learned assessing officer, but he failed to
       confirm the said facts from Shri S.K. Gupta during the course of assessment
       proceedings.

       8. It is also contended that the right of natural justice is so fundamental that
       the failure to observe the principles of natural justice .cannot be made good in
       appeal and lack of opportunity before the Assessing Officer cannot be
       rectified by the appellate authority by giving such opportunity. Reliance was
       placed on the following decisions rendered by Hon'ble Supreme Court:
                (i)    Shreeram Durga Prasad [RB vs. Settlement Commission
                       (1989) 176 ITR 169 (SC)]
                (ii)   Nawaabkhan vs. State of Gujarat AIR 1974 SC 1471
                (iii) CWT vs. Jagdish Prasad Choudhary (1995) 211 ITR 472
                       (Patna) [F.B.]
                (iv)   Appropriate Authority vs. Vijay Kumar Sharma (2001) 249 ITR
                       554 (SC)
                (v)    Tin Box Co. Vs. CIT (2001) 249 ITR 216 (SC)."

6.2.   The record shows that these submissions were forwarded by the CIT(A)
to the AO as is evident from page 10-13 of the order under challenge wherein the
Remand Report received by the CIT(A) from the AO has been extracted. For
ready-reference, the same is also reproduced hereunder :-
       2.2.   "The appellant's submissions were forwarded to the AO for eliciting
       his comments or rebuttal, if any and the AO submitted his report dated
       13/03/2012 reiterating the arguments contained in the Assessment Order .
       Relevant portions of his remand report is extracted hereunder:

       "During the assessment proceeding, the assessee, vide question no. 10.2 and
       10.3 of the questionnaire dated 07.11.2008, was asked to explain the
       connection with investing companies and investee companies, with reference
       to the books of account and other documents as per pages 30-33 of Annexure-
       A-31 and Page 25 of Annexure A-1 found and seized from S.K. Gupta Group
       of cases at H-108, 2nd Floor, New Asiatic Building, Connaught Place, New
       Delhi during the course of search and seizure operation under section 132 of
       the Income Tax Act, 1961.

       The assessee submitted merely evasive replies devoid of any merits. The
       assessee failed to furnish any evidence to establish his contention that these
       transactions does not belong to the' assessee. It is worth mentioning that the
       names of the companies of the assessee clearly figure in the seized documents
       that were relied upon by the assessing officer. Further, the assessee failed to
       establish any business connection with the companies of Shri S.K. Gupta.

       As far as the entries as per documents referred to in question no. 10.2, is
                             15                      I.T.A .No.-5516 & 5517/Del/2012


concerned, the same have been mentioned in the ledger account in the name
of Shri Anil Khandelwal, assessee and it bears the name of Bondwell on
different dates. It also has pay order (P.O.) nos. Clearly mentioned against
the name of companies like Swen, Era, Hiiech, DMC, SPG etc. which forms
part of Shri S. K Gupta Group of cases. So the assessee's claim, that it has
nothing to do with this document, is incorrect. The description of the entries
on seized documents referred to in question no. 10.3, very well indicates the
specific names like Bondwell Insurance Brokers, E-Synergy Infosystems Pvt.
Ltd. and Paradigm Advertising which are the companies/concerns in which
assessee's family members or relative are interested.

Regarding opportunity to cross examine the author of these documents
(pages 30-33 of Annexure-A-31 and Page 25 Of Annexure-A-1 found and
seized from S.K. Gupta Group of cases at H-108, 2nd Floor, New Asiatic
Building, Connaught Place, New Delhi), it is stated that there is no material
to show that the assessee was provided any such opportunity.

The submission of the appellant that a search and seizure operation was
also carried out in the case of the appellant himself and no corroborative
evidence was found from his business and residential premises, need not be
given any importance as it is a matter of common sense that evidences that
can establish unaccounted money (or money's worth 1) are kept to the
minimum, in least number of hands/place and that too for the least possible
time. Therefore, once evidences to establish the payment of cash for obtaining
accommodation entry have been found at one place covered under search,
non finding of the same from any other place is immaterial.

The submission of the appellant that no other corroborative evidences were
found, is incorrect in the light of the following:-

a) It has been established that Shri. S.K. Gupta was providing
accommodation entries with the help of his companies and entities.

b) The evidences relied upon were found from the premises of Shri. S.K.
Gupta.

(c)   The evidence relied upon mention the names of companies of Shri. S.K.
Gupta which has been established to be bogus/paper companies having
no real business activity and being maintained only for the purpose of
providing accommodation entries.

d) The assessee failed to establish any business connection with the
companies of Shri S.K. Gupta nor could the assessee file any evidence to
explain as to why the name of his companies appear in the documents
maintained by Shri S.K. Gupta who was, admittedly, an entry provider.

The contention of the assessee that he, in his individual capacity, had not
                                     16                       I.T.A .No.-5516 & 5517/Del/2012


       carried out any audit for Shri S.K. Gupta or companies controlled by him is
       incorrect, evasive and conceals the fact whether M/s Anil Khandelwal and
       Associates had carried out such audit of either Shri S.K. Gupta or any of his
       companies/entities. The assessee has admitted to be carrying out the
       profession of Chartered Accountant under this name. There is no material on
       record to show that M/s Anil Khandelwal and Associates is a separate person
       in the eyes of the law. The name suggests that it is a partnership firm in which
       partners have joint and several liability.

       The contention of the assessee that the addition of unaccounted cash was
       made only the basis that assessee was a professional friend of Shri S.K.
       Gupta. is incorrect. Several evidences were gathered during the search to
       establish that the nexus between Shri S.K. Gupta and the assessee goes
       beyond a professional friendship. Notwithstanding the close nexus, the
       addition of unaccounted cash was not made on account of the nexus between
       the assessee and Shri S.K Gupta, rather, it was the basis of concrete
       evidences depicting transfer of amounts from bogus entities/companies of Shri
       S.K. Gupta who was an entry provider.

       In fact the assessee has taken accommodation entries for his family
       concerns from companies of Shti. S.K. Gupta Group of cases. For this
       purpose, assessee has made cash payments and also paid commission @ 2%
       which is very much evident from the entry dated 02.09.2005 at page 31 of
       Annexure A-31 of party A-5 seized during the course of search and seizure
       operation in Shri S.K. Gupta group of cases.

       The assessee has made cash payment on various dates against which
       the group companies of Shri S.K. Gupta has issued pay orders, obviously
       accommodation entries of investment. Even if it is considered that assessee
       has acted as conduit for getting accommodation entries for his group of
       companies by rotating the cash funds, the peak cash amount is worked out on
       08.09.2005 at Rs.27,00,000/- (Rs.1,00,000/- + Rs. 6,50,000/- + Rs.6,50,000 +
       Rs. 6,85,000/- + Rs. 5, 15,000/-). Since assessee had failed to give any specific
       information along with confirmation from his group companies/concerns who
       have taken accommodation entries from the group companies/concerns of
       Shri. S.K. Gupta, this peak amount of Rs. 27,00,000/- was rightly added to
       assessee's income as unexplained cash in the hands of the assessee."

6.3.   The impugned order further shows that thereafter the CIT(A) confronted
the assessee with the remand report received. The assessee filed a Rejoinder
thereto. The contents of the same have been brought out by the CIT(A) in para
2.2.1 to 2.2.2 of the impugned order. The same is reproduced hereunder for
ready-reference:-
                                    17                      I.T.A .No.-5516 & 5517/Del/2012


       2.2.1 In his rejoinder, the appellant has given detailed para-wise arguments
       against the observations made by the AO in his remand report. According to
       the appellant, the addition made by the AO was not justified in view of the
       facts that the documents on the basis of which the addition has been made was
       neither seized from the control and possession of the appellant nor belonged
       to the appellant and that no corroborative evidence was brought on record
       during the simultaneous search conducted in the case of the appellant himself.
       The appellant, in his rejoinder, has also mentioned that on being given an
       opportunity to cross-examine Shri S.K.Gupta, from whose possession and
       control the impugned seized material was found, Shri S.K.Gupta has
       categorically denied having entered into any transaction with the appellant or
       his concerns, which makes it clear that no addition on the basis of the
       impugned documents could be made in the hands of the appellant. However,
       the assessing officer has offered no comments on the Cross Examination of
       Sh. S.K. Gupta on 05.04.2011 which indicates that the contention of the
       appellant has been accepted by him.

       2.2.2 Besides the above contentions, the appellant has also made detailed
       submissions regarding non-applicability of legal presumptions contained in
       section 292C in respect of documents found and seized from a third party. It
       has been contended that in a number of case laws it has been held that
       presumption under section 132(4A) is only· against the person in whose
       possession the search material is found and not against any other person. It is
       further held that presumption is rebuttable and not conclusive and it cannot be
       applied in the absence of corroborative evidence. Reliance in this regard has
       been placed on various case laws as mentioned hereunder:-
       i.      Straptex (India) Private Limited v Deputy Commissioner of Income
              tax [2003] 841TD 320 (IT AT - Mumbai)
       ii.    Assistant Commissioner of Income tax v Kishore Lal Balwani Rai
              [2007] 17 SOT 380 (ITAT - Chandigarh)
       iii.   Sheth Akshay Pushpavadan v Deputy Commissioner of Income tax
              [2010] 130 TT J 42 (ITTA - Ahmedabad)
       iv.    Rama Traders v First Income tax Officer [1988] 25 ITD 599 (ITAT
              Patna)(TM)


6.4.   In the above background the CIT(A) proceeded to decide the issue in the
following manner, which has been challenged by the Revenue:-
       2.3 I have carefully considered the facts of the case, the arguments of the
       appellant and the position of law. The AO has made the impugned addition on
       the basis of documents found and seized from Shri S. K Gupta, a third party.
       His primary reasoning is that in these papers there are intelligible narrations
       signifying payments of cash on various dates by appellant to various group
       companies of Shri S.K.Gupta , who have issued accommodation entries for
                              18                      I.T.A .No.-5516 & 5517/Del/2012


investment in the companies in which the appellant and his relatives are
interested. The appellant on the other hand has contended that no
presumption is available to the Assessing Officer u/s 132(4A)/292C of the I T
Act with regard to the impugned seized documents as they were neither found
and seized from the appellant nor do they belong to the appellant. Further, the
appellant has also contended that despite a simultaneous search operation in
the           case            of           the           appellant,          no
evidence whatsoever has been found which correlates with the impugned
seized documents found from the premises of Shri S. K. Gupta ,a third party.
The appellant has also taken the ground that Shri S. K. Gupta himself had
denied the authorship/ ownership of the impugned documents during his
statement on 13/12/2006 and reiterated the same even during his cross
examination by the appellant before the AO on 05/04/2012. The appellant has
also taken the ground that since Shri S. K. Gupta, during his cross
examination by the appellant before the AO, has categorically denied
having any transactions in cash with the appellant or his family members,
companies or entities owned by him or them, the impugned addition made by
the AO is based on no evidence but on presumptions, conjectures and
surmises. I have perused copies of the statement of Shri S. K. Gupta recorded
during the search operation on 13/02/2006 as well as the Cross- examination
statement     of    Shri    S.   K.     Gupta      dated    05/04/2011    which
was forwarded by the AO without any comments vide his remand report dated
02/11/2011 in respect of A.Y.2007-0S. It is seen from these statements that Shri
·S. K. Gupta has denied having authored the impugned seized material and
has also denied that they are part of his books of accounts. He has also denied
having made any cash transactions with the appellant or his family members
or entities owned .by them and has also denied having received any
commission for the alleged accommodation entries given to such entities
belonging to the appellant or his family members. The relevant
portions of these statement are extracted hereunder for ready reference: -

A. Extracts from the statement of Shri S. K. Gupta at the time of
   search recorded on 13/12/2006 :

"Q-13 During the search & seizure operation u/s 132 of IT Act at the above
      premise certain Books of accounts & loose papers were found and
      seized and inventoried as Annexure 'A', sr. No, A-29 to A-36 of the
      said annexure is note books. Please explain the nature of these books
      and also explain the entries recorded therein. Please also explain as to
      which concern of your group these note books belong.
Ans. I don't know about these rough books and how they are lying in my
      office premise.

Q.14. How do you say these above annexure are rough books?
Ans.   Apparently looks as rough books. We are maintaining all our books
      on computer electronically.
                              19                      I.T.A .No.-5516 & 5517/Del/2012


Q.15. Since the above annexure contain mostly daily record of cash receipts
      or cash payments and cheque payment, and have been seized from
      your premise, the onus lies on you to prove the presence of these
      annexures.
Ans. As I have told earlier I don't know about these annexures and I have
      come to this Office today only and these books were not seized in
      front of me. I don't know about the where about of these books.
      These books may be rough entries of daily entries as shown to me in
      detail of our group companies & enter transfer and deposits. Further
      explanations will be given in your office".

B. Extracts from the Cross Examination of Sh. S.K. Gupta dated
   05.04.2011 as conducted before the AO:

"01. Mr. S.K. Gupta as per page 7 and other statements given by you to the
Income Tax department during the course of search on your premises on 12-
12-2006 you have disowned Annexure A, particularly Annexure A-31, A-33
and A-5. You have also said that these are rough books lying in your office. Do
you still stand by these statements?

A 1. I still stand by my statement given on 13-12-2006.
02. Are you the author of annexure A-5, annexure A-31, or annexure A-33
found and seized from your premises?
A2. No.1 am not.
Q3. Whether I have been given or taken cash as per or in lieu of any
recordings done in the annexure A-5, A-31 or A-33?
A3. No I have not given or taken any cash from you and your office.
04. Did I pay or receive any commission out of any transactions referred to in
any of the annexure A-1,.A-31 or A-33?
A4 .. No, neither I received nor I paid any commission.
Q5. Do you know any other person by the name Anil Khandelwal?
A5. Yes, I know 2-3 more Anil Khandelwal belongs to my native place.
Q6.      Did you ever receive or pay cash as per or in lieu of or commission or'
any other transaction against any of my family members, companies or entities
owned by me/them?
 A6. No I have never received or paid any cash to above your
 connected persons."
                                                          (Emphasis supplied)
 2.3.1 A perusal of the above extracts clearly indicates that in the
 absence of any corroborative evidence found during the search at the
 premises of the appellant, no adverse inference can be drawn against
 the appellant merely on the basis of the seized documents as found and
 seized from the premises of the third party. As has been held in a
 number of judicial pronouncements relied on by the appellant and
 extracted in para 2.2.2 hereinabove, presumption u/s 134(4A)/292C is
 available only in the case of the person from whose possession and
 control the documents are found and it is not available in respect of a
                           20                     I.T.A .No.-5516 & 5517/Del/2012


third party. Even in the case of such a person from whose possession
and control any incriminating document is found, the presumption u/s
132(4A)/292C is a rebuttable one. Since in the case of the appellant, no
corroborative documents or evidence has been found from the control
or possession of the appellant, I hold that the legal presumption as
incorporated u/s 132(4A)/292C will not be available to the Assessing
Officer in the appellant's case.

2.3.2. Further, the appellant has also denied the contents of the
impugned seized documents and the person from whom the impugned
documents were seized has also stated during cross-examination that
there has been no cash transactions between him and the appellant or
his family members or entities in which they are interested. The AO has
heavily emphasized on the fact that Shri.S.K.Gupta was an entry
provider and since the names of the companies in which the appellant's
family members or relatives were interested was found mentioned in the
document seized from Shri S.K.Gupta, it is enough to conclude that the
appellant must have paid cash to Shri Gupta to receive accommodation
entries from his group companies. I am afraid, I cannot concur with
such logic in the absence any corroborative evidence to suggest that the
entries found in the seized documents were also reflected in the books
of the appellant or his concerns. It is well settled in law that the loose
papers, diaries and documents cannot possible be construed as books
of account regularly kept in the course of business. Such evidence
would, therefore, be outside the purview of Section 34 of the Evidence
Act, 1972. Therefore, the revenue would not be justified in resting its
case just on the loose papers and documents found from third party if
such documents contained narrations of transactions with the assessee
as decided by the Hon'ble Supreme Court in the case of Central Bureau
of Investigation vs. V.C.Shukla (1988) 8 SSC 410 and Chuharmal vs.
Commissioner of Income Tax (1988) 172 250/38 Taxman 190 (SC).

2.3.3 On a careful consideration of the totality of the facts and
circumstances of the case and the evidence on record, it is clear that
neither any document was found from the possession or control of the
appellant during the simultaneous search operation which shows that
any amount was transacted in cash by the appellant with the
Companies of Shri. S.K.Gupta for getting accommodation entries from
them so as to enable the Assessing Officer to draw adverse inference
against the appellant on the basis of legal provision available u/s
132(4A)/292C nor the Assessing Officer has been able to bring out any
material evidence to the effect that the appellant had actually earned
such undisclosed income so as to rebut the denial made by the
appellant. Further since on cross-examination by the appellant before
the AO, Sh.S.K.Gupta categorically denied having received any cash
from the appellant, his family members or entities in which they were
interested, and the AO has not brought on record any adverse material
                                    21                     I.T.A .No.-5516 & 5517/Del/2012


        to controvert such denial, it would not be justified to fasten the
        impugned tax liability on the appellant. Accordingly the addition made
        by the AO cannot be legally justified or upheld. The only ground raised
        in this appeal is, therefore, decided in favour of the appellant.
                                                         (Relief of Rs.27,00,000/-)


7.      We have heard the rival submissions and perused the material available on
record. On a consideration of the same, we find that the arguments of the Ld.
CIT DR have no merit. We find that the specific questions put to Sh.S.K.Gupta
extracted in the impugned order during the cross-examination cannot be termed
to be vague where full facts have not come out. A perusal of the same shows that
consistently Sh.S.K.Gupta states that no money has been received or paid by him
relatable to the annexures shown. The other objection of the Ld. CIT DR that
the questions put forth in the cross-examination specifically question 14 & 15
were also vague. We find that the arguments of the Ld. AR that these are the
extracts of the statement of Sh.S.K.Gupta recorded at the time of the search are
correct and the Ld. CIT DR is mistaken in her arguments to contend that the
questions No-14 & 15 extracted in the impugned order are vague questions put
forth during the cross examination. It is seen that the assessee in both the years
has filed a Paper Books running into 71 pages and 87 pages respectively and
none of the parties have considered it necessary or expedient to refer to any
document or fact therein. As an illustration we extract the index from ITA No-
5516/Del/2012 which is more or less identical to the index filed in ITA No-
5517/Del/2012:-
               IN ITA No-5516/Del/2012
S.No.         Particulars                                                     Page No
01.           Submission                                                       01-09
02.           Statement of assessee recorded at Home                           10-13
03.           Statement on assessee recorded at office of assessee             14-30
04.           Panchnama                                                        31-34
05.           Statement of assessee recorded on 25.04.2007                     35-39
6.            Annexure A - 31 of party 5 seized from the premises of           40-41
                                  22                    I.T.A .No.-5516 & 5517/Del/2012


             S K Gupta during the course of Search & Seizure operation
             On 12.12.2006
7.           Assessment order under section 143(3) of the I,T Act,          42- 47
             1961 of Anil Khandelwal for the assessment year
             2006-07 passed by the Asst. Commissioner of Income tax,
             Central Circle - 9, New Delhi
8.           Statement recorded on Cross Examination of Sh.S.K              48-49
             Gupta at the office 35 Of DClT, CC-9, New Delhi.
09.          Copy of Remand Report                                         50-52
10.          Appellate order under section 143(3) of the Income tax        53-71
             Act, 1961 of assessee for the assessment year
             2006-07 passed by the Commissioner of Income Tax
             (Appeals) - XXXII, New Delhi

                    IN ITA No-5517/Del/2012
S.No.        Particulars                                                 Page No
01.          Submission                                                   01-09
02.          Statement of assessee recorded at Home                       10-13
03.          Statement of assessee recorded at office of assessee         14-30
04.          Panchnama                                                    31-34
05.          Statement of assessee recorded on 25.04.2007                 35-39
06.          Annexure A - 33 of party 5 seized from the premises          40-62
              Of S K Gupta during the course of Search & Seizure
             operation at his premises on 12.12.2006
7.           Assessment order under section 143(3) of the I.T              63-66
             Act, 1961 of assessee for the assessment year
             2007-08 passed by The Asst. Commissioner of Income tax,
             Central Circle - 9, New Delhi
8.           Statement recorded on Cross Examination of                    67-68
             Sh. S.K. Gupta at the office of DClT, CC-9, New Delhi.
09.          Copy of Remand Report                                         69-70
10.          Appellate order under section 143(3) of the Income tax        71-87
             Act, 1961 of assessee for the assessment year
              2007-08 passed by the Commissioner of Income Tax
              (Appeals) - XXXII, New Delhi

7.1.    We find that no evidence has been placed before us nor any cogent
argument has been raised before us so as to show that on facts the view taken by
the CIT(A) was not correct. In the absence of any specific infirmity in the
impugned order or reliance placed upon any evidence upsetting the view taken,
we find that the department has failed to offer any meaningful argument in
support of its claim. No reasons which can be legally accepted so as to remand
                                23                   I.T.A .No.-5516 & 5517/Del/2012


the matter have also been placed before us. Thus in the light of the arguments
advanced before us being satisfied by the reasoning and finding arrived at in the
impugned order, we are of the view that the departmental appeal has no merit.
We further find that the finding arrived at in the impugned order is fortified by
the principle laid down in the judgement of the Hon'ble Bombay High Court in
the case of ACIT vs Lata Mangeshkar (1973) 97 ITR 696 (Bom.). A perusal of
the same shows that in the facts of that case reliance placed by the Revenue on
the statement of two witnesses was considered to be not relevant for making an
addition in the hands of the assessee therein. It is seen that whereas one of the
witnesses was considered to be a person who could not have any knowledge the
other witness who though was a partner in the concerned firm had given a
statement that he had made payments to the singer in "black". Their Lordships
were pleased to observe in the facts of that case that the statement at best could
arouse suspicion but suspicion could not take place of proof and in the absence
of proof, the statement was discarded. We also find that the order of the Co-
ordinate Bench dated 07.02.2013 relied upon by the assessee in DCIT vs Yashpal
Narendra Kumar in ITA No-5340 to 5342/Del/2012 also supports the case of the
assessee fully. The Co-ordinate Bench therein held that addition on the basis of
statement of the third party without any corroborative evidence is not tenable.
7.2.   Accordingly for the detailed reasons given hereinabove, we find that there
is no merit in the departmental appeal and the same is dismissed accordingly.
8.     In the result ITA No-5516/Del/2012 is dismissed.
8.1.   No separate arguments have been advanced by the parties in ITA No-
5517/Del/2012 as the consistent stand of the parties before the Bench has been
that facts and circumstances remain identical to ITA No-5516/Del/2012 and the
finding therein would apply to 2007-08 A.Year in equal force. Considering the
facts which we have briefly touched in para 2.3 of this order following the
                              24                  I.T.A .No.-5516 & 5517/Del/2012


reasoning and finding arrived at in ITA No-5516/Del/2012 the finding arrived at
in the impugned order is upheld. Accordingly ITA No-5517/Del/2012 is also
dismissed.
9.    In the result ITA Nos. 5516 & 5517/Del/2012 are dismissed.
      The order is pronounced in the open court on 18th of July 2014.

      Sd/-                                                      Sd/-
(T.S.KAPOOR)                                              (DIVA SINGH)
ACCOUNTANT MEMBER                                    JUDICIAL MEMBER

Dated:- 18/07/2014
*Amit Kumar*

Copy forwarded to:
1.   Appellant
2.   Respondent
3.   CIT
4.   CIT(Appeals)
5.   DR: ITAT
                                                  ASSISTANT REGISTRAR
                                                        ITAT NEW DELHI

 
 
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