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2013 (11) TMI 1272 - AT - Income TaxSearch and Seizure u/s 132(1) - Addition of unaccounted cash made on protective basis - Held that - Addition on the basis of statement of the third party without any corroborative evidence is not tenable - protective addition in the hands of assessee firm has been deleted by the Commissioner of Income Tax(A) in all assessment years under consideration - Following Rama traders vs. First ITO 1988 (2) TMI 142 - ITAT PATNA and in Asst. CIT v Kishore Lal Balwani Rai 2007 (6) TMI 299 - ITAT CHANDIGARH - no addition could be made, on the basis of presumption raised by section 132(4A), in the hands of the assessee where in the books of another firm, certain figures were found showing the purchase made by the assessee though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable Presumption - The Commissioner of Income Tax(A) held that the substantive additions made in the cases of Shri Mukesh Garg could not sustain, the protective additions made by the Assessing Officer in the hands of assessee partnership firm cannot survive - Decided against Revenue.
Issues Involved:
1. Deletion of protective additions by the Commissioner of Income Tax (Appeals) for AYs 2004-05, 2007-08, and 2008-09. Detailed Analysis: Issue 1: Deletion of Protective Additions by the Commissioner of Income Tax (Appeals) for AYs 2004-05, 2007-08, and 2008-09 Background: The Revenue filed appeals against the consolidated order of the Commissioner of Income Tax (Appeals)-XXXI, New Delhi, which deleted the protective additions made by the Assessing Officer for the assessment years 2004-05, 2007-08, and 2008-09. The additions were based on documents seized during a search and seizure operation under section 132(1) of the Income Tax Act, 1961, in the case of Shri Mukesh Garg group. Assessment Details: The assessee, a partnership firm, was issued a notice under section 153C of the Income Tax Act, 1961, requiring it to file returns of income for the relevant assessment years. The Assessing Officer made protective additions of Rs. 24,00,000 for AY 2004-05, Rs. 84,42,000 for AY 2007-08, and Rs. 1,47,30,000 for AY 2008-09, based on unaccounted profits and investments. Commissioner of Income Tax (Appeals) Observations: The Commissioner of Income Tax (Appeals) noted that the Assessing Officer's protective additions were based on the assumption that the family of the assessee is a joint family and that the assessee firm was a regular supplier of Katha (catechu) to the RMD Group. The substantive addition was made in the hands of Shri Mukesh Garg, while the protective addition was made in the hands of the assessee firm. Legal Precedents and Findings: The Commissioner of Income Tax (Appeals) referenced several legal precedents and findings to support the deletion of the protective additions: 1. Presumption under Section 132(4A): The presumption under section 132(4A) is applicable only to the person from whose possession or control the incriminating material is found. This presumption is not applicable to third parties unless corroborated by other evidence. (Straptex India P Ltd. v Oy. CIT, Rama Traders vs. First ITO, Asst. CIT v Kishore Lal Balwani Rai, Sheth Akshay Pushpavadan v Dy. CIT) 2. Third-Party Evidence: Additions based on third-party documents or statements without corroborative evidence are not justified. The legal provision relating to presumption under section 132(4A) cannot be applied to third parties in the absence of corroborative evidence. (Prarthana Construction (P) Ltd. Vs. Deputy Commissioner Of Income Tax, Additional Commissioner of Income Tax Vs. Miss Lata Mangeshkar, Amarjit Singh Bakshi (HUF) Vs. Assistant Commissioner of Income Tax) 3. Cross-Examination: The assessee should be allowed to cross-examine third-party witnesses whose statements are used as evidence. Failure to provide such an opportunity violates principles of natural justice. (CIT Vs. SMC Share Broker Ltd., CIT Vs. S M Aggarwal) Conclusion: The Commissioner of Income Tax (Appeals) concluded that since the substantive additions made in the case of Shri Mukesh Garg could not be sustained, the protective additions in the hands of the assessee firm also could not survive. The appellate authority held that the protective additions were not tenable in the absence of corroborative evidence and cross-examination of third-party witnesses. Tribunal's Decision: The Tribunal found no perversity, infirmity, or ambiguity in the impugned order of the Commissioner of Income Tax (Appeals). It upheld the deletion of the protective additions, stating that when substantive additions are deleted by a competent statutory authority, the related protective additions cannot survive. Consequently, the Tribunal dismissed the appeals of the Revenue. Result: The appeals of the Revenue were dismissed.
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