2016 (1) TMI 1074 - AT - Income Tax

Addition on the basis of papers seized from the assessee s premises - Held that - In view of the documentary evidence, there is no justification for making addition in respect of entries reflected in the books of account of Tropical and given by cheque by Mr. Shashank Patel and his family members. Receipt of the amount by Tropical Investment and Securities Pvt. Ltd. through cheque from Shashank Patel and his family members, cannot be treated as income of the assessee. The fact that Tropical Investment and Securities Pvt. Ltd. was also assessee with the same assessing officer, has not been denied anywhere. All the above facts were brought to the notice of the AO along with the confirmations, however, the AO had brushed aside the same. Accordingly, we direct the AO to delete the addition of ₹ 1,30,00,000/- (Rs.1,20,00,000 Rs.10,00,000/--), being amount received by Tropical Investment and Securities Pvt. Ltd. through account payee cheques from Shashank Patel and his family members. In respect of balance amount alleged to be received from Shashank Patel in cash has not been enquired by the AO. In the interest of justice and fair-Play the balance addition of ₹ 3,14,16,332/- is restored back to the file of the AO for deciding afresh after making full enquiry from Shashank Patel and M/s Tropical Investment and Securities Pvt. Ltd.. We direct accordingly. - Decided in favour of assessee in part

Summary

Issues:
Appeal against addition of income based on seized papers.

Analysis:
The appeal was filed by the assessee against the CIT(A)'s order for the assessment year 2002-03, challenging the addition of Rs. 4,44,64,252 based on papers seized from the assessee's premises. The assessee had earlier transferred membership card of Bombay Stock Exchange to a company, Tropical Securities & Investment Pvt. Ltd. The AO made the addition solely based on the name of the assessee mentioned in a seized loose paper, despite explanations provided. The CIT(A) upheld the AO's action, leading to the further appeal.

The assessee argued that the loose paper was inconclusive and not indicative of unaccounted income, emphasizing that the entries were reflected in Tropical's regular books. Various documents were submitted to establish transactions with Shashank Patel and his family members, which were also confirmed. The AO and CIT(A) were criticized for ignoring confirmations and failing to appreciate the relationship between the assessee and Shashank Patel.

Upon careful consideration, the Tribunal found that the seized paper did not belong to the assessee and that the transactions mentioned were related to Tropical, not the assessee. Documentary evidence and confirmations were provided to support this, which the AO had disregarded. Consequently, the Tribunal directed the AO to delete the addition of Rs. 1,30,00,000 received by Tropical from Shashank Patel and his family members.

Regarding the remaining alleged amount received in cash from Shashank Patel, the Tribunal ordered the AO to conduct a thorough inquiry before making any decision. Therefore, the Tribunal allowed the appeal in part, restoring the balance amount to the AO for further examination.

In conclusion, the Tribunal's decision favored the assessee by acknowledging the lack of justification for the addition based on the seized papers and emphasizing the need for a comprehensive inquiry into the remaining alleged amount received in cash.