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2011 (7) TMI 1166 - AT - Income TaxSeized Documents were Dumb Documents - Presumption u/s 292C - Rebuttable Presumption u/s 132 - Onus of Rebutting the Presumption - CIT(A) held that seized documents recording purchases and sales of diamonds gold and paintings are dumb documents and rejected the same by stating - it is for the discretion of the Court to make or not to make the presumption u/s 292C HELD THAT - Presumption in context of Sec. 132 - We find that the term used in the provision of sec. 292C may be presumed is discussed but in the context of sec. 132(4A) by Hon ble Apex Court in the case of PR. METRANI VERSUS COMMISSIONER OF INCOME-TAX 2006 (11) TMI 136 - SUPREME COURT said term implies that the presumption is rebuttable. The provisions of sec. 292C does not confer discretionary power on the Department to presume or not to presume the correctness of seized documents as held by CIT(A). We are of the view that the provision of Sec. 292 will equally apply to both assessee as well as Department and such section only creates a legal fiction whereby in case of search and seizure contents of seized material are presumed to be true unless rebutted by the party claiming contrary. Onus of rebutting presumption - In present case since seized documents were found from possession and control of the assessee during the search in his case a presumption u/s 292C had to be drawn that the said documents belonged to the assessee and the contents thereof were true unless disproved by cogent evidence. The onus to prove that what was apparent from these books was not real was on the party which claimed it to be so. Thus the onus was on the Department to bring on record some acceptable evidence to prove that what was stated in the seized documents did not depict the actual state of affairs. The AO and CIT(A) failed to discharge such onus by bringing on record some cogent evidence to disprove notings in the seized papers. Documents seized are Dumb Documents or Not? - In the present case to give a finding that the documents are dumb and such a finding can be reviewed on the ground that there is no evidence to support it or it is perverse. Hence we consider documents found from the possession of the assessee was real and declaration made by assessee on the basis of entry recorded in these documents of long-term capital gain are true and there is no basis not to accept the same. Accordingly we delete the addition made by CIT(A) - Decision in favour of Asseessee Unexplained Investment of Shares - Since we have already held that seized documents are correct financial statements prepared after incorporation the entries from the seized documents are also true explaining the investment in shares. Accordingly we delete the addition - Decision in favour of Assessee Addition on account of Unexplained Cash - Since total undisclosed income arising from the seized documents were already offered for taxation by assessee and cash found in course of search stood explained from the entries recorded in seized documents no separate addition can be made in respect to cash found. We have already accepted the seized documents as genuine documents explaining away the entries the cash explained by assessee cannot be treated unexplained. Accordingly this issue of assessee s appeal is allowed. Addition on account of Undisclosed income - Since we have already accepted seized material as true automatically the expenditure recorded in these documents is explained and the assessee has also made disclosure to cover up the same. Accordingly this addition is not warranted and hence deleted.
Issues Involved:
1. Rejection of books of account, revised balance sheet, and P&L account for assessment years 2006-07, 2007-08, and 2008-09. 2. Rejection of entries in seized documents RM-1 to RM-4 under Section 292C of the IT Act. 3. Addition of undisclosed investments in property and shares for assessment years 2006-07, 2007-08, and 2008-09. 4. Disallowance of interest paid to M/s. Floor & Walls. 5. Addition of unexplained cash found during the search. Issue-wise Detailed Analysis: 1. Rejection of Books of Account, Revised Balance Sheet, and P&L Account: The assessee's appeals for the assessment years 2003-04 to 2005-06 were dismissed as not pressed due to no revenue implication. For assessment years 2006-07 to 2008-09, the CIT(A) confirmed the AO's rejection of the books of account, revised balance sheet, and P&L account. The AO found discrepancies and inconsistencies in the seized documents RM-1 and RM-2, leading to the rejection of these documents as reliable sources of financial information. The CIT(A) upheld this rejection, citing that the documents were not day-to-day accounts but were prepared recently and lacked supporting evidence. 2. Rejection of Entries in Seized Documents RM-1 to RM-4 under Section 292C: The CIT(A) and AO invoked Section 292C, which presumes the correctness of seized documents unless proven otherwise. The CIT(A) held that the presumption under Section 292C is not for the benefit of the assessee and that the onus was on the assessee to prove the correctness of the entries. The CIT(A) found that the assessee failed to provide necessary details and supporting evidence for the transactions recorded in the seized documents, thereby rejecting the claim of the assessee about the sale of paintings, diamonds, and gold. 3. Addition of Undisclosed Investments in Property and Shares: For assessment years 2006-07 and 2007-08, the CIT(A) confirmed the additions of Rs. 6.09 crores and Rs. 90 lakhs, respectively, on account of undisclosed investments in property at Salt Lake, Kolkata. For assessment year 2008-09, an addition of Rs. 18.60 crores was made for unexplained investment in shares. The CIT(A) held that the seized documents RM-1 and RM-2 were dumb documents and could not be relied upon. However, the Tribunal found that the documents were detailed and self-explanatory, containing entries of both disclosed and undisclosed nature. The Tribunal held that the documents should be presumed to be true under Section 292C unless disproved by the Department. Since the Department failed to disprove the entries, the Tribunal deleted the additions made by the CIT(A). 4. Disallowance of Interest Paid to M/s. Floor & Walls: The CIT(A) omitted to consider the additional ground filed by the assessee regarding the disallowance of interest of Rs. 2,93,366 paid to M/s. Floor & Walls. The Tribunal admitted this issue and set it aside to the file of the CIT(A) for adjudication on merits. 5. Addition of Unexplained Cash Found During the Search: During the search, cash of Rs. 50,61,250 was found, out of which Rs. 50,00,000 was seized. The AO added this amount as unexplained cash. The CIT(A) confirmed this addition, rejecting the claim of the assessee that the cash was generated from undisclosed transactions noted in RM-1 and RM-2. The Tribunal, however, found that the entire cash found during the search was adequately explained by the entries in the seized documents. Since the documents were accepted as genuine, the cash was not treated as unexplained, and the addition was deleted. Conclusion: The Tribunal allowed the appeals of the assessee for assessment years 2006-07, 2007-08, and 2008-09, deleting the additions made by the CIT(A) on account of undisclosed investments and unexplained cash. The issue of disallowance of interest was remanded back to the CIT(A) for adjudication. The appeals of the assessee for assessment years 2003-04 to 2005-06 were dismissed as not pressed. The Revenue's appeal was dismissed.
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