2018 (5) TMI 2164 - AT - Income Tax

Use of electronic record as evidence - Admission of additional ground - additions based on the materials retrieved from the CPU of the computer as seized by the Department during the course of search - as argued Department did not comply with the conditions mentioned u/s 65B(4) of the Evidence Act, when electronic record seized was used as evidence against the assessee - Whether by virtue of the provisions of clause (iib) of Section 132(1) of the Income Tax Act, 1961 adopting the definition of electronic record supplied by Section 2(1)(f) of the Information Technology Act, 200 to the data seized from a computer, the threshold determination related to the admissibility and legitimacy of such data in whatever form has not to be undertaken in accordance with law and in particular, the mandatory prescription of Sections 65A, 65B of the Evidence Act, 1872 read with Section 93 and the Second Schedule of the Information Technology Act, 2000; before raising the presumption under sub-section (4-A) of Section 132 and also before using a statement taken from any person on the basis of such seized data against the assessee under sub-section (4) of Section 132? HELD THAT - The additional ground raised is a pure legal issue and goes to the root of the matter since the major additions are based on the materials that are retrieved from the CPU of the computer that was seized by the Department during the course of search. The Hon ble Supreme Court in the case of Anvar P.V. v. P.K.Basheer Ors 2014 (9) TMI 1007 - SUPREME COURT had held that if electronic record is being used as evidence, the conditions mentioned u/s 65B(4) of the Evidence Act has to be complied with. The Hon ble Supreme Court in the case of T.K.Sanalkumar v. CIT Cochin 2012 (7) TMI 1162 - SC ORDER while disposing off SLP filed by the assessee, had directed the Commissioner to consider a ground which is identical to the additional ground raised by the assessee. The additional ground raised by the assessee is a legal issue, which is very vital for adjudicating the case, therefore, in the interest of justice and substantial cause, we admit the additional ground raised. Since the additional ground raised was not considered by the lower authorities, we restore the additional ground for adjudication to the files of the Assessing Officer. As we have restored the adjudication of the additional ground to the files of the A.O., the other issues which are there in these appeals are also to be adjudicated by the A.O. afresh.

Summary

Issues:
1. Restoration of ITA No. 456/Coch/2010 to 461/Coch/2010 by High Court.
2. Appeals against penalty imposition u/s 271(1)(c) for A.Y. 2005-2006 to 2007-2008.
3. Additional ground raised by assessee regarding the admissibility of electronic records.

Issue 1: Restoration of ITA No. 456/Coch/2010 to 461/Coch/2010 by High Court
The High Court restored ITA No. 456/Coch/2010 to 461/Coch/2010 to ITAT following its judgment in ITA No. 172/2011 to 174/2011 and ITA No. 157/2011, 159/2011, and 164/2011. These cases concerned assessment years 2002-2003 to 2007-2008.

Issue 2: Appeals against penalty imposition u/s 271(1)(c) for A.Y. 2005-2006 to 2007-2008
The assessee filed appeals against orders confirming penalty imposition u/s 271(1)(c) for assessment years 2005-2006 to 2007-2008. The CIT(A) had upheld the Assessing Officer's penalty orders. However, these appeals were restored to the Assessing Officer due to the restoration of quantum assessments by the High Court.

Issue 3: Additional ground raised by assessee regarding the admissibility of electronic records
The assessee raised an additional ground related to the admissibility of electronic records obtained during a search operation. The ground questioned the compliance with Section 65B(4) of the Evidence Act for using electronic records as evidence. The High Court granted liberty to raise additional grounds. The ITAT admitted this ground as it was a crucial legal issue affecting the case's core. The issue of electronic record admissibility was considered significant, and the ITAT directed the Assessing Officer to adjudicate this ground along with other issues.

In conclusion, the ITAT allowed the appeals filed by the assessee for statistical purposes, dismissed the stay applications as infructuous, and ordered the restoration of quantum assessments and penalty imposition decisions to the Assessing Officer for further adjudication in line with the High Court's directions.