2019 (4) TMI 1925 - AT - Income Tax

Assessment u/s 153A - Income from undisclosed sources - HELD THAT - As decided in SUBHASH KHATTAR case 2016 (8) TMI 460 - ITAT DELHI assessment u/s 153A of the act in absence of incriminating material found during the course of search at the premises of the assessee and in absence o abatement of assessment on the date of search cannot be made in the present case as per the above cited decisions including the decision of Hon ble Jurisdictional Delhi High Court in the case of CIT vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Under the circumstances we are of the view that the Assessing Officer was not justified in assuming jurisdiction u/s 153A and authorities below ere also not justified in making and sustaining the addition in question merely on the basis of a hard disc found during the course of search - without any corroborative evidence in support we thus hold that the assessee/appellant succeeds on both the above issues i.e. on validity of assumption of jurisdiction u/s 153A and the addition in question - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of income from undisclosed sources based on seized documents.
2. Validity of additions under Section 153A in the absence of incriminating documents found during the search.
3. Relevance of third-party confessions in making additions to the assessee's income.

Issue-Wise Detailed Analysis:

1. Addition of Income from Undisclosed Sources Based on Seized Documents:
The primary issue in both appeals was the addition of income from undisclosed sources based on an excel sheet found during the search of the AEZ group. The Assessing Officer (AO) made additions of Rs. 31,85,850/- and Rs. 25,20,884/- for Assessment Years 2007-08 and 2006-07, respectively, based on this document. The AO observed that the assessee had made cash payments for property investments which were not recorded in the books of accounts. The assessee denied making any such cash payments, arguing that no single piece of evidence was available to prove the alleged cash investment. The AO, however, relied on the seized excel sheet and the confession of a third party, Sh. I.E. Soomar, who admitted to similar cash investments and paid taxes on them.

2. Validity of Additions under Section 153A in the Absence of Incriminating Documents Found During the Search:
The Tribunal noted that no incriminating documents were found during the search of the assessee’s premises on 10.02.2012. The Tribunal referred to its previous decision in the case of Subhash Khattar, where it was held that additions under Section 153A cannot be made in the absence of incriminating documents found during the search. The Tribunal emphasized that merely because a third party had surrendered an amount, it does not bind other independent assessees. The Tribunal also cited the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla, which supported the view that no addition under Section 153A can be made without incriminating evidence.

3. Relevance of Third-Party Confessions in Making Additions to the Assessee's Income:
The Tribunal observed that the AO had relied on the confession of Sh. I.E. Soomar, who admitted to making cash investments and paid taxes on them. However, the Tribunal held that such confessions cannot be used as a basis for making additions to the assessee’s income without corroborative evidence. The Tribunal referred to the Delhi High Court’s decision in CIT vs. Prem Prakash Nagpal, where it was held that additions cannot be made solely based on documents found at a third party’s premises indicating cash transactions without independent evidence.

Conclusion:
The Tribunal allowed both appeals, holding that the additions made by the AO were not justified. The Tribunal emphasized that no addition under Section 153A can be made in the absence of incriminating documents found during the search and that third-party confessions cannot be used as the sole basis for making additions to the assessee’s income. The Tribunal’s decision was consistent with its previous rulings and the decisions of higher courts, including the Delhi High Court. The appeals were allowed, and the additions made by the AO were deleted.