2019 (10) TMI 1120 - AT - Income Tax

Unaccounted investment - alleged seized document having few transactions on debit/left hand side and credit on right hand side - HELD THAT - As far as the figures of ₹ 60,00,000/- and ₹ 2,60,000/- which is on the left hand/debit side we observe that the assessee entered into partnership in Regal Samarth Krishna Construction Company which was executing the project of construction of flats in the name of Chitrakoot . The assessee also entered into partnership with other concern Regal Samarth Krishna Builders on 20.10.11 which was running another project named Triveni Heights . In the firm Regal Samarth Construction Company the assessee has introduced capital of ₹ 30,00,000/- through cheque during financial year 2012-13 and similarly in Regal Samarth Construction Company also assessee being 30% partner has introduced capital by cheque/cash of ₹ 30,00,000/-. So there remains no dispute that the amount of ₹ 60,00,000/- which is appearing in the seized material, stands duly explained with the capital accounts of the partnership firms and supports the contention of Ld. Counsel for the assessee that ₹ 60,00,000/- is duly accounted for in the books of accounts. Remaining amount of ₹ 2,60,000/- have also been paid by cheque as appearing in the seized document, thus the figure of ₹ 2,60,000/- also stands duly explained by the assessee. Since the assessee is one of the working partner in Regal Samarth Construction Company and the alleged transaction have direct nexus with the assessee but during the course of proceedings before both the lower authorities and before us assessee failed to produce any material evidence in support of his claim that the alleged amount of ₹ 85,00,000/-is not having any ingredient of undisclosed/un recorded income. So we are of the view that ₹ 85,00,000/- is the amount to be received by the assessee and it can be purely unaccounted income or it can be an amount which comprises of income and capital introduced by the assessee. Since the revenue has not brought any other material evidence to prove that the alleged amount is purely an income the assessee certainly deserves benefit of doubt and further since below the alleged account itself the sum of ₹ 22,40,000/- is mentioned as an amount referred as balance to be for payment. This amount of ₹ 22,40,000/- is the difference between ₹ 85,00,000/- (i.e. amount to be taken less ₹ 62,60,000/- the amount invested by the assessee), therefore the addition for unaccounted investment in our view cannot be more than ₹ 22,40,000/-. We therefore are of the considered view that the alleged addition of unaccounted investment needs to be sustained only to the extent of ₹ 22,40,000/- and thus the finding of Ld. CIT(A) is set aside and the assessee gets relief of Rsd.65,20,000/-. Ground No.1 of the assessee is partly allowed.

Summary

Issues Involved:
1. Justification of addition towards alleged unaccounted investment of ?87,60,000.
2. Validity of the seized documents as evidence.

Issue-wise Detailed Analysis:

1. Justification of Addition towards Alleged Unaccounted Investment of ?87,60,000:

The assessee contested the addition of ?87,60,000 towards alleged unaccounted investment. The Assessing Officer (AO) made this addition based on seized documents during a search operation, which indicated transactions involving the assessee. The AO added ?32,60,000 as the difference between ?62,60,000 (left side) and ?30,00,000 (capital investment in Regal Samarth Krishna Builders) and ?55,00,000 as the difference between ?85,00,000 (right side) and ?30,00,000 (disclosed investment).

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, noting that the seized documents showed a nexus between the amounts and the projects involving the assessee. The CIT(A) observed that the assessee failed to provide material evidence to support his claim that the amounts were not unaccounted investments.

The tribunal examined the seized documents and the assessee's submissions. It was noted that the assessee admitted to introducing ?60,00,000 as capital in the partnership firms, which was duly accounted for. However, the tribunal found that the amount of ?85,00,000 mentioned as "to be taken from Chitrakoot" could potentially include both capital and income. Given the lack of conclusive evidence from the revenue to prove that the entire amount was unaccounted income, the tribunal concluded that only ?22,40,000 (the difference between ?85,00,000 and ?62,60,000) should be treated as unaccounted investment. Thus, the tribunal partly allowed the appeal, reducing the addition to ?22,40,000.

2. Validity of the Seized Documents as Evidence:

The assessee argued that the seized documents found at a third party's premises should not be considered as evidence against him. The tribunal, however, noted that the assessee had admitted to some of the transactions recorded in the seized documents, thereby establishing a connection. The tribunal rejected the assessee's reliance on a jurisdictional High Court judgment, as the facts of the case differed significantly.

The tribunal emphasized that the documents contained entries related to the assessee's transactions, including capital introduced in partnership firms. Therefore, the tribunal upheld the validity of the seized documents as evidence but limited the addition to ?22,40,000 based on the analysis of the transactions recorded in the documents.

Conclusion:

The tribunal concluded that the addition towards unaccounted investment should be limited to ?22,40,000, providing partial relief to the assessee. The tribunal upheld the validity of the seized documents as evidence, given the established connection between the transactions and the assessee. The appeal was partly allowed, reducing the addition from ?87,60,000 to ?22,40,000.