2016 (9) TMI 1254 - AT - Income Tax

Assessment u/s 153A - addition to income - evidentiary value of photocopies of the documents - Held that - It is not in dispute that survey was conducted at the premises of Chandigarh Overseas Private Limited and its sister concerns and during the course of survey, certain loose papers including copies of agreement to sell in question were impounded. Thus, no agreement to sell or any incriminating documents were found from the possession of the assessee. There is no recovery of any incriminating document from the power and possession of the assessee. The Assessing Officer has not brought any material on record to prove any connection of the assessee with these documents/agreement to sell. The Assessing Officer wanted to rely upon the photocopies of the agreement to sell in question. Therefore, the onus would be upon the Assessing Officer to prove that the documents found during the course of survey from third party, belonged to the assessee. The original of the photocopies were never recovered in survey proceedings or in post survey proceedings. The documents found are only photocopies and no original documents were found. Therefore, photocopies of the documents would have little evidentiary value. No material have been brought on record if the assessee was connected with any deal as alleged in the photocopies of the agreement to sell. No details of any sale consideration or actual amount received or paid by the assessee have been brought on record. No evidence have been brought on record if agreements to sell in question were acted upon by the parties. The agreement to sell dated 29.1.2005 is not on any stamp paper. The Hon ble Delhi High Court in the case of CIT Vs. Murti Devi (2010 (9) TMI 1208 - DELHI HIGH COURT) while dismissing departmental appeal referred to the findings of the Tribunal in which it was held that the photocopies of the documents have very little evidentiary value and in the absence of original documents, photocopies of the documents are not admissible and cannot be the basis for making addition. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the additions made by the Assessing Officer based on photocopies of agreements found during a survey.
2. Whether the agreements to sell and the subsequent transactions were acted upon.
3. The evidentiary value of the photocopies of the agreements.
4. The requirement of independent enquiry by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Validity of Additions Based on Photocopies:
The Revenue's appeal contested the deletion of additions made by the Assessing Officer, which were based on photocopies of agreements found during a survey at a third party's premises. The Assessing Officer made substantial additions on account of unexplained investment and profits from the sale of land.

The CIT (Appeals) deleted these additions, noting that the photocopies had little evidentiary value as per the Supreme Court decision in Moosa S Madha & Azam S Madha Vs CIT. The CIT (Appeals) emphasized that the documents were not original, were not found from the assessee’s premises, and were not on stamp paper with missing signatures of all parties.

2. Whether Agreements Were Acted Upon:
The Assessing Officer added amounts based on the assumption that the agreements to sell were acted upon, leading to unexplained investments and profits. However, the CIT (Appeals) found no evidence that the agreements were acted upon. The assessee and other buyers had not purchased the entire land as per the agreement to sell, and the registered sale deed only covered a portion of the land.

The CIT (Appeals) also noted that the Assessing Officer did not conduct any enquiry from the sellers, buyers, or companies involved to verify the transactions. The Kerala High Court judgment in CIT Vs. Smt. K.C. Agnes was cited, stating that the amount in the sale deed cannot be ignored based on an agreement unless it is proved that the agreement was acted upon and the amount stated was actually paid.

3. Evidentiary Value of Photocopies:
The CIT (Appeals) and the Tribunal both emphasized that photocopies of agreements found during a survey have little evidentiary value. The Tribunal referred to the Delhi High Court decision in CIT Vs. Moorti Devi, which held that photocopies are not admissible as evidence in the absence of original documents.

The Tribunal also noted that the Assessing Officer did not prove any connection of the assessee with the documents found during the survey. The documents were found from a third party, and the originals were never recovered, making the photocopies inadmissible as evidence.

4. Requirement of Independent Enquiry:
The CIT (Appeals) and the Tribunal criticized the Assessing Officer for not conducting any independent enquiry from the parties involved in the agreements. The Tribunal highlighted that no enquiry was made from the sellers, buyers, or companies to verify the transactions.

The Madras High Court judgment in CIT Vs P.V. Kalyana Sundaram, affirmed by the Supreme Court, was cited, which concluded that in the absence of independent enquiry, the Assessing Officer was not justified in making additions based on statements and agreements.

Conclusion:
The Tribunal upheld the CIT (Appeals) decision to delete the additions, finding no merit in the departmental appeals. The Tribunal emphasized the lack of evidentiary value of photocopies, the absence of independent enquiry, and the failure to prove that the agreements were acted upon. Both departmental appeals were dismissed.