2017 (8) TMI 528 - AT - Income Tax

Addition found in entries found in a seized document - presumption placed on the seized documents u/s 132(4A) - cash found during the search - such cash belongs to assessee as personal cash or belongs to the company - Held that - Some figures have been noted in a columnar form. It is not clear as to whether they pertained to receipt or payment . The AO also could not bring any material on record to understand the meaning and nature of entries. Hence, in the absence of any other corroborative material, we are of the view that the said document should only be construed as dumb document. We also find no reason for extrapolating the figures into lakhs. Hence the addition made by the AO has to be taken as an addition made on surmises and conjectures, which is liable to be deleted. The assessee has also given copy of cash ledger of M/s Flemingo Duty free shop. A careful perusal of the same would show that the same records cash transactions of all the shops located in various airports like Kolkatta, Chennai, Trichy etc., meaning thereby, it does not pertain to Bombay branch alone. Normally the director should be keeping the cash balance of Bombay branch only for safe custody purpose. The said cash book shows cash balance of ₹ 4.36 lakhs as on 31.10.2009, but the same represents cash balance available as at the close of business on that date. Hence it is not clear that the above said cash balance pertains to Bombay branch alone or it was a combined cash balance of all branches. Hence we are of the view that claim of the assessee that the entire cash balance of the business concern was available with him is hard to believe. Accordingly we are of the view that the credit for entire cash balance cannot be given. The possibility of keeping some portion of cash belonging to Bombay branch cannot be ruled out. Accordingly we are of the view that an adhoc sum of ₹ 1.00 lakh can be given credit and the same would meet the ends of justice. - Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Deletion of addition of ?22.05 crores based on entries found in a seized document.
2. Confirmation of addition of ?11 lakhs seized from the assessee.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?22.05 Crores:
The Revenue was aggrieved by the CIT(A)'s decision to delete the addition of ?22.05 crores, which was based on entries found in a seized document during a search operation at the premises of the Flamingo/Bermaco Group. The document in question contained erased pencil notations, deciphered by a forensic laboratory, which the Assessing Officer (AO) interpreted as numeric figures in lakhs, leading to the assessment of ?22.05 crores as undisclosed income. The CIT(A) deleted this addition, reasoning that without further corroborative evidence, the seized document alone could not substantiate such a conclusion. The CIT(A) referenced the ITAT's earlier judgment for A.Y. 2006-07 to 2008-09, which stated that the AO could not extrapolate numbers into "lakhs" without additional evidence. The CIT(A) also relied on the Supreme Court's decision in CIT Vs. Kalyansundaram (294 ITR 94).

Upon appeal, the Tribunal upheld the CIT(A)'s decision. The Tribunal noted that the entries in the seized document were ambiguous, lacked clarity on whether they pertained to receipts or payments, and had no corroborative material to support the AO's interpretation. The Tribunal reiterated that without clear evidence, the document should be treated as a "dumb document," and any addition based on it would be speculative. The Tribunal also referenced its own previous decision in the assessee's case, which had similarly dismissed additions based on uncorroborated notations. Consequently, the Tribunal found no reason to interfere with the CIT(A)'s deletion of the ?22.05 crores addition.

2. Confirmation of Addition of ?11 Lakhs:
The assessee contested the CIT(A)'s decision to confirm the addition of ?11 lakhs, which was seized during the search operation. The AO had added this amount as undisclosed income, arguing that the assessee could not reconcile the seized cash with the company's cash withdrawals. The assessee claimed that the cash belonged to Flamingo Duty Free Shops Pvt. Ltd. and provided personal and company cash book records showing cash balances exceeding ?11 lakhs. However, the CIT(A) upheld the addition based on the AO's remand report, which pointed out inconsistencies in the assessee's explanation and the absence of relevant account books during the search.

The Tribunal partially modified the CIT(A)'s order. It acknowledged the personal cash balance of ?7.33 lakhs and the cash balance of ?3.80 lakhs from the business concern, totaling more than the seized amount. The Tribunal directed the AO to allow a set-off of ?7.33 lakhs from the addition, noting that the personal cash book showed a balance consistent with the seized cash. Additionally, the Tribunal considered the possibility of some portion of the business's cash being held by the assessee and allowed an ad-hoc credit of ?1 lakh. Thus, the Tribunal reduced the addition from ?11 lakhs to ?2.67 lakhs, providing a partial relief to the assessee.

Conclusion:
The appeal by the Revenue was dismissed, and the appeal by the assessee was partly allowed. The Tribunal upheld the deletion of the ?22.05 crores addition while reducing the ?11 lakhs addition to ?2.67 lakhs, offering a balanced resolution based on the evidence and arguments presented.