2014 (1) TMI 660 - HC - Income Tax

Whether an assessment order regarding undisclosed income passed on the basis of loose sheet of papers has no evidentiary value - Held that - The lease agreement entered into between the assessee and the landlord concerning the first-floor of the premises at Safdarjang Enclave, New Delhi, was in existence for the said period - The documents identified as document no.6 contained entries regarding higher rent paid for the said premises for various periods - Based on the entries, the Assessing Officer and the CIT(Appeals) arrived at the concurrent findings of fact that higher rent was paid for the rented premises - The Assessing Officer observed that the rented premises was in the heart of the city of New Delhi at Safdarjang Enclave and the rent is not likely to be Rs.6000/- per month and that to be it would not remain fixed for all the four years. Since loose-sheets seized are documents within the meaning of section 158B(b), there is presumption raised under section 132(4A) regarding the documents seized - In the light of the presumption under section 132(4A), the assessee ought to have produced other documents to disprove the entries made in the loose sheets - The assessee has not adduced any rebuttal evidence to show that the entries made in the diary/loose sheets were not income in the hands of the assessee - The lower authorities recorded concurrent findings of fact and the Tribunal was justified in confirming the additions Decided against assessee.

Summary

Issues:
1. Undisclosed House Rent
2. Unexplained Educational Expense
3. Misc. Payments
4. Other Payments
5. Assessment Order based on Loose Sheets

Undisclosed House Rent:
The assessee contested the addition of undisclosed house rent based on a lease agreement and seized documents. The Assessing Officer calculated the undisclosed rent to be Rs.4,48,600, while the CIT (Appeals) granted relief of Rs.72,000. The Tribunal further reduced the addition to Rs.2,56,600, emphasizing discrepancies in the seized document. The Tribunal's decision was upheld due to the prime location of the rented premises and lack of evidence to disprove the entries.

Unexplained Educational Expense:
An addition of Rs.2,27,398 was made based on loose-sheets for the children's educational expenses. The Assessing Officer estimated total expenses at Rs.3,77,396, considering them undisclosed. However, the CIT (Appeals) ruled that additions based on estimates were not permissible in block assessments. The Tribunal upheld this decision, emphasizing that the Assessing Officer cannot go beyond seized documents.

Misc. Payments:
An addition of Rs.2,91,000 was made for various payments based on diary entries and seized documents. Both the CIT (Appeals) and the Tribunal confirmed this addition, highlighting the lack of evidence to challenge the Assessing Officer's findings.

Other Payments:
Payments totaling Rs.5,80,000 were added based on seized documents, which were upheld by the CIT (Appeals) and the Tribunal. The decision was supported by the absence of evidence contradicting the Assessing Officer's conclusions.

Assessment Order based on Loose Sheets:
The main issue raised in the appeal was the validity of the assessment order relying on loose sheets. The assessee argued that such documents lacked evidentiary value and should not be the sole basis for additions. However, the Revenue contended that loose sheets seized during search are considered as documents under Section 158B(b) and enjoy a rebuttable presumption under Section 132(4A). The Court upheld the Tribunal's decision, emphasizing the legal framework allowing for such presumptions and the assessee's failure to rebut them.

In conclusion, the Court dismissed the appeal, affirming the Tribunal's decision and answering the substantive questions against the assessee. The judgment highlighted the importance of seized documents in block assessments and the legal provisions enabling presumptions in such cases.