2015 (8) TMI 1494 - AT - Income Tax

Revision u/s 263 - whether the seized documents show that some illegal gratification has been given to the assessee from Mukesh Sharma? - HELD THAT - Tribunal has already examined the same papers in case of Shri Narottam Mishra. Therefore, this Tribunal cannot take a different view. Therefore, this matter is covered in favour of the assessee. It is well settled that if the same inquiry by the Assessing Officer in all original proceedings even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion. We are of the view that the assessee was served with details in specific questionnaire u/s 141 of the Income-tax Act, 1961. The assessee has also given the detailed submission regarding the admissibility of diary and AO has made the enquiry from the Executive Engineer. Various bank accounts were examined in detail. No investigation or unexplained entry was found by the Assessing Officer. Details of movable and immovable properties were called for by the Assessing Officer. Nothing adverse or unexplained was found. The guidance was found from Jt. Commissioner of Income Tax u/s 144A was duly received and kept on record. The AO has during the course of assessment proceedings made a detailed enquiry of this loose slips/ dumb loose slips found with Mukesh Sharma. All these evidences have been classified in the form of table and primary evidence and evidence has been apprised as per Income-tax Act, 1961. The AO has made the assessment as per the CBDT guidelines and as per the CBDT guidelines, in the first stage, the AO acquainted with the appraisal report and seized material and took up the case for assessment and thereafter, the AO has made the detailed enquiry and after filing the return, the AO had accepted, prima facie, acceptable evidence and he has made a proper enquiry and after making the enquiry the AO has also called for his report u/s 144A of the Act and after getting the report of 144A, the AO has come to the conclusion that the assessee has not received any money. Whatever the documents are on the record are dumb document and on the basis of these documents, no addition can be made. Commissioner has directed to collect the original file from Indore Commissioner and Bhopal Commissioner, which do not suggest anything. We found that if the AO had initially any suspicion as to primary evidence, he could have himself corrected it by taking time to conduct the enquiry into this matter. After enquiry, he arrived at the conclusion that suspicion of unaccounted gratification received by the assessee by the piece of evidence found during the course of search were not adequate and sufficient to make addition. We are of the view that ld. Commissioner is not justified in his action and his case is duly covered by the decision of CIT vs. Ashish Rajpal, 2009 (5) TMI 18 - DELHI HIGH COURT wherein it is held that if during the course of assessment proceedings, if the enquiry has been made by the Assessing Officer and if the sufficient enquiry is made, then it cannot be terms as prejudicial to the interests of revenue. Appeal of the assessee is allowed.

Issues Involved:
1. Legitimacy of the assessment order by the Assessing Officer (AO) regarding illegal gratification.
2. Adequacy of the inquiry conducted by the AO.
3. Applicability of Section 263 by the Commissioner of Income-tax (CIT).
4. Interpretation and relevance of seized documents during the search and seizure operation.
5. Compliance with the Indian Evidence Act in tax proceedings.

Detailed Analysis:

1. Legitimacy of the Assessment Order by the AO:
The AO assessed the case based on documents seized during a search at the residence of Shri Mukesh Sharma, which allegedly indicated illegal gratification received by the assessee. However, the AO concluded that the evidence was insufficient to make any additions to the income of the assessee. The AO's decision was based on a detailed inquiry and the application of Section 34 of the Evidence Act, which states that entries in books of account alone are not sufficient to charge a person with liability.

2. Adequacy of the Inquiry Conducted by the AO:
The AO conducted a thorough inquiry, including issuing a detailed questionnaire under Section 142(1), examining various bank accounts, and calling for the records of contracts awarded to Nagarjun Construction Co. Ltd. and Simplex Infrastructure Ltd. Despite these efforts, the AO found no corroborative evidence to support the allegations of illegal gratification. The AO's conclusion was that the available evidence was inadequate to make any additions to the assessee's income.

3. Applicability of Section 263 by the CIT:
The CIT invoked Section 263, arguing that the AO's order was erroneous and prejudicial to the interests of the revenue due to inadequate inquiry. However, the Tribunal found that the AO had conducted a detailed and reasonable inquiry. The Tribunal emphasized that the CIT cannot invoke Section 263 merely because he disagrees with the AO's conclusions. The CIT must provide clear and unambiguous findings that the AO's order is erroneous and unsustainable in law, which was not done in this case.

4. Interpretation and Relevance of Seized Documents:
The seized documents included various loose sheets and diary entries, which the AO initially considered as primary evidence. However, after a detailed inquiry, the AO concluded that these documents were "dumb documents" and did not provide sufficient evidence of illegal gratification. The Tribunal agreed with the AO's assessment, stating that the documents did not conclusively prove any wrongdoing by the assessee.

5. Compliance with the Indian Evidence Act in Tax Proceedings:
The Tribunal reiterated that while the strict rules of the Indian Evidence Act do not apply to tax proceedings, the basic principles of evidence must still be followed. The AO's reliance on Section 34 of the Evidence Act was appropriate, as the entries in the seized documents alone were not sufficient to make any additions to the assessee's income without corroborative evidence.

Conclusion:
The Tribunal concluded that the AO had conducted a thorough and adequate inquiry into the allegations of illegal gratification. The CIT's invocation of Section 263 was found to be unjustified as the AO's order was neither erroneous nor prejudicial to the interests of the revenue. The appeal of the assessee was allowed, and the order of the AO was upheld.

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