2019 (2) TMI 174 - HC - Income Tax

Addition based on documents found in search - undisclosed cash payments - Held that - We find that the Tribunal has examined the materials on record to come to factual conclusion that there was no evidence to link the assessee with the alleged cash payments referred to in the documents seized during the search against the Dhariwal Industries. We notice that except for reference in such documents to one P.C.Jain there was no clarity about the identity of receiptant of such a money. The department could not bring on record any evidence to link the assessee with such receipt. Learned counsel for the assessee had pointed out that even in his statement said Shri Sohan Raj Mehta had not stated that such payments were made to the assessee. - Decided against revenue

Issues:
1. Failure of the ITAT to fulfill its mandate as a Fact Finding Authority
2. Error by the ITAT in not remanding back the issue of identity of the assessee
3. Ignoring facts brought out in notings in loose papers seized as evidence

Analysis:

Issue 1: Failure of the ITAT to fulfill its mandate as a Fact Finding Authority
The appeals in this case arose from a common background related to Income Tax Appeal No.1151 of 2016. The revenue challenged the judgment of the Income Tax Appellate Tribunal (ITAT) on the grounds that the ITAT failed to fulfill its mandate as a Fact Finding Authority by relying on decisions that were deemed irrelevant to the present set of facts. The ITAT's role as a Fact Finding Authority was questioned based on the circumstances of the case and legal provisions.

Issue 2: Error by the ITAT in not remanding back the issue of identity of the assessee
Another issue raised was whether the ITAT erred in not remanding back the issue of the identity of the assessee to the Assessing Officer for verification and ascertainment. The ITAT's decision not to remand the issue back for further verification, especially regarding the identity of the assessee in relation to business transactions with Dhariwal Group, was a point of contention.

Issue 3: Ignoring facts brought out in notings in loose papers seized as evidence
The ITAT was also criticized for ignoring facts presented in notings in loose papers seized as evidence, which were argued to be admissible under Section 10 of the Indian Evidence Act. The relevance and admissibility of these notings in establishing the complicity of the assessee were central to the dispute.

In the detailed analysis of the judgment, it was revealed that the Tribunal had deleted additions made by the Assessing Officer in the hands of the assessee based on seized documents and statements. The Tribunal concluded that the identity of the assessee as the recipient of money from Dhariwal Group was not established, emphasizing that the department failed to link the assessee with the entries referring to payments to P.C. Jain. The legal representatives for both parties presented their arguments, with the department's counsel asserting a serious error by the Tribunal and the respondent's counsel highlighting the factual nature of the issues.

Ultimately, the High Court dismissed the tax appeals after considering the arguments and examining the materials on record. The Court affirmed the Tribunal's factual conclusion that there was no evidence linking the assessee to the alleged cash payments mentioned in the seized documents. The judgment emphasized the factual basis of the issue and concluded that no question of law arose, leading to the dismissal of the appeals.

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