2015 (9) TMI 1611 - HC - Income Tax

Incriminating materials and money found in search - presumption under section 132(4A) - Held that - Merely because the findings of the Assessing Officer was approved by the Appellate Tribunal, the order of the Tribunal could not be said to be vitiated. That apart, on going through the order of the Appellate Tribunal, we found that each and every circumstances pointed out by the assessee during the course of the arguments were considered by the Tribunal and has found that the evidence recorded by AO during the course of the search was corroborative in nature and, therefore, were acceptable in law. Tribunal has also found that the amount recovered from the hotel premises was proved to be the amount belonging to the company and this conclusion is corroborated by the evidence taken on oath. So also, the Tribunal has found that the slips recovered from the office premises were not explained by the assessee and also that having regard to the quantum of contract work undertaken by the assessee, it would be reasonable to presume that the amounts noted in the seized materials represented amounts in lakhs Revision u/s 263 - Held that - As under section 263 the Commissioner had every power to direct the Assessing Officer to take into account materials, accounts and other circumstances which were not considered when the original assessment order was prepared. On a query from the Bench as to whether the reassessment done which was the subject matter was on the basis of the materials which were not considered by the Assessing Officer in the original assessment, learned senior counsel has informed that so far as the assessment which gave effect to the order under section 263, the materials considered were entirely different. Therefore, we are of the considered opinion that the finding of the Tribunal that the order of the Commissioner of Income-tax invoking the power under section 263 was in order does not require any interference in this appeal.

Issues Involved:
1. Validity of the addition of money found in possession of a third party as undisclosed income of the appellant.
2. Justification of the Income-tax Appellate Tribunal's decision regarding the invocation of section 132(4A) of the Income-tax Act.
3. Legality of the presumptions made by the Assessing Officer based on entries in loose sheets.
4. Authority of the Commissioner of Income-tax to invoke section 263 of the Income-tax Act.
5. Validity of the reassessment and the subsequent orders passed by the Assessing Officer and the Tribunal.

Issue-wise Detailed Analysis:

1. Validity of the Addition of Money Found in Possession of a Third Party as Undisclosed Income:
The court evaluated whether the sum of money found in the possession of Anupkumar Saha at the Inter Continental Hotel, New Delhi, could be justified as the undisclosed income of the appellant. The appellant argued that there was no connection between the company and Anupkumar Saha or the money recovered. However, the court found that the evidence collected during the search, including sworn statements, was sufficient to link the money to the appellant. The Tribunal's decision to sustain the addition was upheld.

2. Justification of the Income-tax Appellate Tribunal's Decision on Section 132(4A):
The appellant contended that the Tribunal erred in holding that the Assessing Officer was not compelled to invoke section 132(4A) and that the loose sheets belonged to the appellant. The court held that under section 132(4A), any documents or money found during a search could be presumed to belong to the person from whom they were found. The burden was on the appellant to disprove this presumption, which they failed to do. The Tribunal's application of section 132(4A) was deemed correct.

3. Legality of the Presumptions Made by the Assessing Officer:
The appellant argued that the Assessing Officer's presumptions based on entries in loose sheets were unsupported and uncorroborated. The court noted that the Assessing Officer had relied on corroborative evidence, including sworn statements and the context of the seized documents, to conclude that the entries represented amounts in lakhs. The Tribunal's affirmation of these findings was found to be in order.

4. Authority of the Commissioner of Income-tax to Invoke Section 263:
The appellant challenged the invocation of section 263 by the Commissioner of Income-tax, arguing that there were no incriminating circumstances justifying the revision of the assessment order. The court held that section 263 could be invoked if the original assessment was erroneous and prejudicial to the interests of the Revenue. The Commissioner had identified several omissions and relevant materials that were not considered in the original assessment. The Tribunal's decision to uphold the Commissioner's order was found to be justified.

5. Validity of the Reassessment and Subsequent Orders:
The appellant contested the reassessment order passed pursuant to the Commissioner's invocation of section 263. The court found that the reassessment was based on materials that were not considered in the original assessment. The Tribunal had re-evaluated the circumstances and found the reassessment to be in order. The court upheld the Tribunal's decision, finding no legal errors or infirmities.

Conclusion:
The court dismissed the appeals, affirming the Tribunal's decisions on all issues. The questions of law raised by the appellant were answered in the negative and in favor of the Revenue. The court found that the Assessing Officer and the Tribunal had acted within the scope of the law, and the evidence and presumptions drawn were justified.

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