2016 (9) TMI 1577 - AT - Income Tax

Reopening of assessment u/s 147 - Addition on photo copy of unsigned agreement found during the course of search and transferred to the AO - HELD THAT - This unsigned agreement have been forwarded by DCIT, Central Circle-I Ludhiana to the AO on the basis of which the aforesaid reasons have been recorded by AO for re-opening of the assessment. Since the seized document is not found from the possession of the assessee and admittedly the assessee had not signed the agreement in question and since he had not signed the agreement, no liability could be attributed qua that agreement towards him, since he was not a party to the agreement till he had signed the agreement. The decisions in the cases of Kulwant Rai 2007 (2) TMI 185 - DELHI HIGH COURT and Smt. Darshan Kaur 2009 (12) TMI 1039 - PUNJAB AND HARYANA HIGH COURT squarely apply to the fact of the case since photo copy of unsigned agreement was found, therefore, it cannot be read in evidence against the assessee It is not a valid document to be considered adverse in nature against the assessee, therefore, there is no reason to believe for the Assessing Officer to have any information that income chargeable to tax has escaped assessment. Authorities below have been holding that the agreement in question is admissible against the assessee because two of the cheque amounts mentioned in the agreement tally with the sale consideration mentioned in the sale deed of Shri Bhagveer Singh dated 21.05.2008. The date of sale deed i.e. 21.05.2008 would not fall in assessment year under appeal i.e. 2008-09 and there is no evidence or material available on record to prove genuineness of the photo copy of the unsigned copy of the agreement. Merely because some cheque amount is same in both these documents, would not prove that addition could be made against the assessee on the basis of photo copy of unsigned agreement - No reason for the authorities below to hold that the contents given in the photo copy of unsigned agreement are correct. Since on the basis of unsigned agreement, no liability could be attached to the assessee and it is not admissible in evidence against the assessee, therefore, there is no valid reason recorded by the AO for the purpose of re-opening of the assessment in the matter. There is also no basis for making any addition on merit on the basis of photo copy of unsigned agreement. AO wholly unjustified in re-opening of the assessment under section 147/148. - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment under section 147/148 of the Income Tax Act and addition of ?25,73,900.

Analysis:
The appeal challenged the order of reopening the assessment and making an addition of ?25,73,900 for the assessment year 2008-09. The Assessing Officer reopened the assessment based on information received during a search operation, where an unsigned agreement was found. The appellant contended that the unsigned agreement was merely a draft and could not be relied upon as valid evidence. It was argued that the property in question was purchased by the appellant's son, and the entire sale consideration was paid by the appellant on his son's behalf. The appellant asserted that the unsigned agreement was not admissible as evidence.

The CIT(Appeals) upheld the reopening of the assessment and the addition made. It was noted that the details in the seized document matched the actual property transaction, where the appellant's son purchased the property and the appellant paid the consideration. The CIT(Appeals) dismissed the appellant's appeal, stating that the unsigned agreement was valid evidence.

Upon review, the ITAT found that the unsigned agreement, being a photocopy without signatures, could not be considered as valid evidence against the appellant. Citing legal precedents, the ITAT emphasized that the agreement's contents could not be relied upon to make additions to the appellant's income. The ITAT concluded that the Assessing Officer was unjustified in reopening the assessment and making the addition. Therefore, the ITAT set aside the reopening of the assessment and deleted the addition of ?25,73,900.

In summary, the ITAT's judgment focused on the validity of the unsigned agreement as evidence for reopening the assessment and making additions to the appellant's income. The ITAT ruled in favor of the appellant, emphasizing that the unsigned agreement lacked legal standing and could not be used to support the addition. The ITAT's decision highlighted the importance of valid evidence in tax assessments and concluded that the Assessing Officer's actions were unwarranted in this case.