2017 (10) TMI 1353 - HC - Income Tax

Addition made on account of unexplained investment in properties as per the diaries recovered when the identity of the property has been established and found to be matching in amount with the seized document which could be treated as corroborative evidence - Addition u/s. 2(22)(e) - no addition can be made in assessment u/s. 153A which does not emanate from the incrimination documents seized? Held that - As decided in favour in case of the wife of the present assessee the case of the Revenue is that certain loose documents were found during search representing the assessee s cash transactions recorded in terms of rupees in crores. The assessee however denied this suggesting that these figures represented the calculations for the purpose of vastu shastra. CIT (Appeals) as well as the Tribunal concurrently held that there was no material suggesting that the figures indicated in loose papers represented assessee s cash transactions. This was thus purely a question of fact. No question of law therefore arises. Second question pertains to deemed dividend under section 2(22)(e) of the Act. The Tribunal found that there was no material found during the survey relatable to this issue and therefore confirmed the view of the CIT(Appeals)

Summary

Issues:
1. Deletion of addition made on account of unexplained investment in properties based on recovered diaries.
2. Deletion of addition under section 2(22)(e) by the Appellate Tribunal.

Analysis:

1. The first issue revolves around the deletion of the addition made on account of unexplained investment in properties based on recovered diaries. The Revenue appealed against the judgment of the Income Tax Appellate Tribunal, questioning whether the Tribunal erred in law and facts by deleting the addition. The Tribunal had previously dismissed a similar case involving the wife of the present assessee, where it was observed that loose documents found during search did not necessarily represent cash transactions of the assessee. The Tribunal concluded that there was no material to support the Revenue's claim, and it was a question of fact rather than law. The Tribunal's decision was upheld, indicating that the figures in the loose papers were not indicative of cash transactions, but possibly for vastu shastra purposes. Therefore, the court dismissed the appeal on this issue.

2. The second issue concerns the deletion of addition under section 2(22)(e) by the Appellate Tribunal. The Tribunal found no material during the survey related to this issue and upheld the decision of the CIT(Appeals). The Tribunal's conclusion was based on the absence of evidence supporting the deemed dividend under section 2(22)(e) of the Act. As a result, the court dismissed the Tax Appeal related to this issue as well. The judgment highlights the importance of factual findings and the necessity of substantial evidence to support additions or deletions in tax assessments. The court's decision underscores the significance of concrete proof in tax matters to avoid arbitrary inclusions or exclusions based on mere assumptions or incomplete information.