2023 (6) TMI 1330 - AT - Income Tax

Addition based on seized materials in Search u/s 132(4) - Addition on the basis of entries in loose slips found during the course of search - addition made by AO towards cash received outside books of accounts - main contention of ld. D.R. is that the statement recorded u/s 132(4)/131 of the Act is self-speaking document and it cannot be overruled - HELD THAT - Reliability of these statements depends upon the facts of each case and particularly surrounding circumstances and in this case the lower authorities reached to the conclusion on the basis of assumption resulting into fostering liability on the assessee on the basis of in-advocate material coupled with statement recorded during the course of search since there is no corroborative material to support the contention of the AO. In the absence of corroborative evidence merely on the basis of admission in the statement recorded u/s 132(4)/131 of the Act no addition could be made by AO. The AO failed to bring on record any materials to support his view to make an addition and there was no reason as to why AO did not proceed further to enquire into the unaccounted income as admitted by assessee in statement recorded u/s 132(4) of the Act. This fact was also not taken care of and also no corresponding assets with reference to unaccounted cash receipt was brought on record. In such circumstances we are not in a position to sustain this addition. Addition made by AO on the basis of contents in loose slips/scribbling pad is not based on any cogent evidence or unaccounted assets or unaccounted investments unearthed during the course of search but solely on the basis of assumption and presumptions. In our opinion suspicion however strong cannot takes place of evidence which can be used against the assessee. In the present case the AO has not made any effort to verify the entries recorded in the loose slips/scribbling pads by making further enquiries and examination/cross examination of the alleged persons or payee of said amount. Further on perusal of entries in the loose slips/scribbling pads as recorded by AO in the assessment order we find that nothing was emanating regarding name and address of persons through whom the said amount was received and the parties for which it has been paid. - Decided in favour of assessee. Addition u/s 69A - Physical cash found in search - Assessee contention that he has been income tax assessee from year to year. This is the accumulated cash balance in the hands of the assessee and the credit to be given - HELD THAT - The assessee has to place necessary evidence to show the availability of cash balance as on the date of search i.e. 30.8.2017. Once the assessee produce the books of accounts of the entities owned by the assessee as a proprietor the AO has to give the credit to the extent of cash balance available in the books of accounts of the assessee as on the date of search. The claim of the ld. A.R. before us was that the assessee received certain amount of cash from his partners Mr. B. A. Ibrahim Mr. Mohammad Mohideen for which the assessee required to furnish necessary evidence to prove the cash availability on this count. Accordingly we direct the assessee to produce the cash book relating to the relevant period along with other evidence to prove the availability of cash balance as on date of seizure of this cash i.e. 30.8.2017. If the assessee produces such evidences before AO to prove the cash availability the AO has to give credence to such evidence or material brought on record by assessee and to decide the issue on that basis. With this observation we remit the issue in dispute to the file of AO for verification of the relevant evidence.

Summary

Issues Involved:
1. Legality of additions based on loose slips found during the search.
2. Validity of statement recorded under section 132(4) and its retraction.
3. Estimation of income on unaccounted cash receipts.
4. Justification of additions made by the Assessing Officer (AO) based on assumptions and presumptions.
5. Protective addition under section 69A of the Income Tax Act.

Summary of Judgment:

1. Legality of Additions Based on Loose Slips:
The Tribunal addressed the issue of whether the loose slips found during the search could be used as a basis for making additions. It was noted that the AO made additions solely based on scribblings in loose slips found during the search without corroborative evidence. The Tribunal emphasized that "suspicion however strong cannot take the place of evidence," and therefore, the additions made by the AO were not sustainable. The Tribunal relied on the principle that "admission is an extremely important piece of evidence, but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect."

2. Validity of Statement Recorded Under Section 132(4) and Its Retraction:
The Tribunal examined the statement recorded under section 132(4) of the Income Tax Act, which was later retracted by the assessee. It was held that the statement recorded during the search cannot be the sole basis for addition without any supporting documents or corroborative evidence. The Tribunal cited the Karnataka High Court's decision in Dr. Syed Anwar vs. DCIT, which held that "seized documents did not bear the signature of the assessee and seized material also did not suggest that assessee had paid any 'on-money', impugned order passed by Assessing Officer was not sustainable."

3. Estimation of Income on Unaccounted Cash Receipts:
The Tribunal addressed the AO's estimation of income at 8% on unaccounted cash receipts. It was noted that the AO had rejected the books of accounts and estimated the income at 8%, which was considered reasonable. However, the Tribunal found that the AO had failed to bring on record any materials to support his view and that there was no reason as to why the AO did not proceed further to inquire into the unaccounted income as admitted by the assessee in the statement recorded under section 132(4) of the Act.

4. Justification of Additions Made by AO Based on Assumptions and Presumptions:
The Tribunal found that the additions made by the AO were based on assumptions and presumptions without any corroborative evidence. The Tribunal emphasized that "merely on the basis of entries in the loose slips/scribbling pad coupled with the statement recorded during the course of search, addition cannot be sustained." The Tribunal deleted the additions made by the AO towards unaccounted cash receipts by the assessee.

5. Protective Addition Under Section 69A of the Income Tax Act:
The Tribunal addressed the issue of protective addition of Rs.50.60 lakhs towards unaccounted cash seized from the premises. The Tribunal remitted the issue back to the AO for verification of relevant evidence. The Tribunal directed the assessee to produce the cash book relating to the relevant period along with other evidence to prove the availability of cash balance as on the date of seizure of the cash. The AO was instructed to give credence to such evidence or material brought on record by the assessee and to decide the issue on that basis.

Conclusion:
The Tribunal allowed the appeals of the assessee in ITA Nos. 733 to 734/Bang/2022 partly and ITA No. 735/Bang/2022 partly for statistical purposes, emphasizing the need for corroborative evidence to support additions based on loose slips and retracted statements.