2020 (1) TMI 1459 - AT - Income Tax

Diary seized during the survey/search operation - addition of own money transaction - noting in diary/document - Noting made in the dairy of the husband of the assessee - HELD THAT - Entries in the Diaries, note books and file containing loose sheets paper not in the form of Books of Accounts and has held that such entries in loose papers/ sheets are not relevant and not admissible u/s 34 of the Evidence Act. Further as to value of the entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible and that they are only corroborative evidence. Even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability. We are of the view, diary seized during the survey/search operation, without corroboration, have no authenticity and therefore, cannot be relied upon. Even entry recorded in the diary qua amount of sale was not confirmed from the buyers of the property and without confirmation, question of any assumption or belief that the entry belongs to the assessee did not arise and hence entry found in diary without any corroborative evidence, cannot be made basis of addition. The authorities below in the instant case, made the addition only on the basis of surmises, suspicion and guess work. Hence, we are unable to sustain the addition made by the Assessing Officer and affirmed by the Ld. CIT(A). Consequently we are inclined to delete the same, resultantly the appeal of the assessee is liable to be allowed.

Issues Involved:
1. Admissibility of diary entries as evidence.
2. Corroboration of diary entries with independent evidence.
3. Application of Section 292C of the Income Tax Act, 1961.
4. Burden of proof on the Revenue.
5. Relevance of precedents in similar cases.

Issue-wise Detailed Analysis:

1. Admissibility of Diary Entries as Evidence:
The primary issue revolves around the admissibility of diary entries found during the search. The tribunal referred to the apex court's decision in the case of Central Bureau of Investigation vs. V.C. Shukla, which held that entries in loose sheets or diaries not maintained as "Books of Accounts" are not admissible under Section 34 of the Evidence Act. The apex court emphasized that such entries alone cannot be sufficient evidence to charge any person with liability and that they are only corroborative evidence requiring independent evidence to establish their trustworthiness.

2. Corroboration of Diary Entries with Independent Evidence:
The tribunal noted that the Assessing Officer (AO) made the addition based on the diary entries without corroborating them with independent evidence. The AO did not confirm the entries from the purchasers of the property or undertake any independent exercise to verify the truth. The tribunal emphasized that without corroborative material, the diary entries could not be relied upon to make an addition. This stance aligns with the Delhi High Court's decision in Commissioner of Income Tax v. Sh. Parveen Juneja, where the court held that entries in a seized document must be corroborated by independent evidence to substantiate any addition.

3. Application of Section 292C of the Income Tax Act, 1961:
The AO relied on Section 292C of the Income Tax Act, which presumes that documents found in possession during a search belong to the person from whom they are seized, and their contents are true. However, the tribunal found that the presumption under Section 292C could not be taken against the assessee in this case because the diary did not belong to the assessee, and the entries were not in her handwriting. The tribunal referenced the decision in Pramod Pandey v. ACIT, which held that jottings in a diary could not be treated as conclusive proof of on-money transactions without corroborative evidence.

4. Burden of Proof on the Revenue:
The tribunal reiterated that the burden of proving allegations of understatement or concealment in the consideration shown lies with the Revenue. This principle was affirmed in the apex court's decision in K.P. Vargheser vs. ITO, where it was held that the Revenue must discharge the burden of proof in cases of alleged understatement or concealment. In this case, the Revenue failed to discharge this burden, as the addition was based solely on the diary entries without any independent corroborative evidence.

5. Relevance of Precedents in Similar Cases:
The tribunal relied on several precedents to support its decision, including the apex court's decisions in Central Bureau of Investigation vs. V.C. Shukla and Common Cause (A registered Society and Ors Vs. Union of India & Ors., as well as the Delhi High Court's decision in Commissioner of Income Tax v. Sh. Parveen Juneja. These precedents consistently held that entries in loose sheets or diaries not maintained as "Books of Accounts" are not admissible as evidence without corroboration and cannot be the sole basis for making additions.

Conclusion:
The tribunal concluded that the diary entries found during the search, without corroboration, lacked authenticity and could not be relied upon to make an addition. The addition made by the AO and upheld by the CIT(A) was based on assumptions, surmises, and guesswork. Consequently, the tribunal allowed the appeal filed by the assessee and deleted the addition. The judgment underscores the importance of corroborative evidence and the burden of proof on the Revenue in cases involving allegations of understatement or concealment.

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