2017 (3) TMI 1518 - HC - Income Tax

Assessment u/s 153A - search u/s 132 - nexus between the seized documents and the assessee - obligation on the department to prove any such nexus in view of the presumption u/s 132(4A) of the I.T. Act, 1961. - Held that - We failed to understand, how and why those documents and contents thereof could not have been treated to belong Assessee when same were seized from her premises, which fact was not disputed by her and she also gave a wrong statement that these documents related to some others but those others disowned and contradicted statement of Assessee. Thereafter Assessee did not furnish any otherwise explanation in respect of aforesaid documents. There was a statutory presumption, therefore, against Assessee. Onus lay upon Assessee to displace said presumption. As we have seen that Assessee gave explanation disowning documents stating that same related to some others but those others denied. It shows that a false statement given by Assessee. Assessee, therefore, fails to dislodge presumption, which, the authorities were justified, in drawing against Assessee, in view of Section 132 (4A) of Act, 1961. CIT(A) as well as Tribunal in this case have completed failed to consider that documents and entries were not disputed by Assessee and instead she submitted an explanation that documents relate to some other persons but those other persons denied it, hence Assessee failed to rebut presumption against her that documents pertain to her, the contents are true and transaction therein relates to Assessee. We answer the questions formulated above in favour of Revenue but hold that presumption under Section 132(4A) of Act, 1961 in the present case for making addition is justified with regard to Annexure-A17, the document referred to in para 3 of assessment order and to that extent order of Tribunal is set aside.

Summary

Issues Involved:
1. Nexus between seized documents and the assessee.
2. Requirement of corroborative evidence for transactions recorded in seized documents.
3. Discharge of onus on the assessee under Section 132(4A) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Nexus Between Seized Documents and the Assessee:
The primary issue was whether the Income Tax Appellate Tribunal (ITAT) was justified in dismissing the department's appeal on the grounds that there was no nexus between the seized documents and the assessee. The court noted that the documents were seized from the premises of the assessee, and under Section 132(4A) of the Income Tax Act, 1961, there is a statutory presumption that such documents belong to the person from whose possession they were seized. The assessee attempted to disown the documents by attributing them to other family members, who subsequently denied ownership. The court held that the ITAT failed to consider that the assessee's explanation was not substantiated, thereby failing to rebut the statutory presumption.

2. Requirement of Corroborative Evidence for Transactions Recorded in Seized Documents:
The second issue was whether the ITAT was justified in holding that corroborative evidence was required for transactions recorded in the seized documents. The court observed that the documents contained clear entries indicating financial transactions. The assessee's explanation that the documents pertained to the liquor business of other family members was contradicted by those individuals. The court held that the ITAT erred in requiring corroborative evidence when the statutory presumption under Section 132(4A) was not rebutted by the assessee.

3. Discharge of Onus on the Assessee Under Section 132(4A):
The third issue was whether the ITAT was justified in holding that the onus on the assessee under Section 132(4A) was discharged when the assessee claimed that the documents belonged to another family member who denied ownership. The court emphasized that the statutory presumption under Section 132(4A) places the onus on the assessee to disprove the presumption. The assessee's failure to provide a substantiated explanation meant that the presumption stood unrebutted. The court cited the case of P.R. Metrani vs. Commissioner of Income Tax and Diwan Singh (HUF) vs. Commissioner of Income Tax to support the view that the onus was on the assessee to disprove the presumption.

Conclusion:
The court concluded that the ITAT and the Commissioner of Income Tax (Appeals) failed to properly consider the statutory presumption under Section 132(4A) and the lack of a substantiated explanation from the assessee. The court partially allowed the appeal, setting aside the ITAT's judgment to the extent of ?7,30,000 and restoring the addition made by the Assessing Officer for this amount. The court held that the presumption under Section 132(4A) justified the addition of ?7,30,000 based on the seized document Annexure-A17, which indicated a cash payment to "Jijaji."