2019 (12) TMI 754 - AT - Income Tax

Addition on the basis of loose paper - resumption u/s 292C - undisclosed income - survey u/s 133A carried out by the Department on the business premises of the assessee - details of share speculation transaction due to favorable share market position - HELD THAT - As per statement itself 4 no document of assessee kept anywhere outside. No other irregularity found in books. Admittedly, the assessee had never entered into any share transaction in past or even subsequently. It defies any logic why the assessee should have ventured into share transaction, that too, speculative in nature, suddenly and without any reason. It also defies logic, why, if it was so lucrative so as to earn ₹ 1.28 crores in such a short period and absolutely without any effort, the assessee should discontinue such activity after few months. The Survey Party was obviously aware about such lacuna/defects/non - existence of any detail, as not a single question was asked about such vital details/missing links, shortcomings, which any normal investigation officer would have asked. We are of the view that the alleged print out in both the cases i.e. Shreeji Transport Services and Amplas Ploymerts Pvt. Ltd., both are dumb documents and no cognizance of the same can be taken for making addition. Both the authorities below have erred in making addition. Hence, addition in the case of Shreeji Transport Services Pvt. Ltd. and addition is deleted. - Appeals of assessee are allowed.

Summary

Issues Involved:
1. Addition of ?90,000 as unaccounted loan taken on Hundi.
2. Addition of ?1,28,60,500 and ?97,01,500 as alleged profit in share transactions for Shreeji Transport Services Pvt. Ltd. and Amplas Polymers Pvt. Ltd., respectively.

Issue-wise Detailed Analysis:

1. Addition of ?90,000 as unaccounted loan taken on Hundi:

During a survey conducted on the business premises of the assessee on 24.02.2006 under section 133A of the Income Tax Act, 1961, a document was found and impounded. This document was a discharge bill of exchange (Hundi) for a sum of ?90,000 drawn in the name of the assessee dated 20-11-2005. The Assessing Officer (AO) treated this ?90,000 as undisclosed income since it was not recorded in the books of accounts. The assessee contended before the Commissioner of Income Tax (Appeals) [CIT(A)] that the bill of exchange was actually dated 20.01.2005 and not 20.11.2005. The CIT(A) did not accept this argument, observing that if the Hundi was drawn in anticipation of a loan to be taken, it should not have remained in the custody of the assessee if the loan was not actually taken. The Tribunal, after reviewing the facts and arguments, concluded that the bill of exchange dated 20.01.2005 pertains to the Assessment Year (AY) 2005-06 and not AY 2006-07. Therefore, the addition of ?90,000 was deleted, and the appeal on this issue was allowed.

2. Addition of ?1,28,60,500 and ?97,01,500 as alleged profit in share transactions:

In the case of Shreeji Transport Services Pvt. Ltd., a survey was conducted on 24th February 2006, during which an Excel printout showing share speculation transactions was found. The AO added ?1,28,60,500 as speculative profit based on the statement of one of the directors, Mr. Rajnikanth C Shah, who initially declared an income of ?1.50 crores. The CIT(A) confirmed this addition, relying on the presumption under section 292C of the Act that the documents found during the survey are to be treated as correct and true. The CIT(A) observed that the appellant failed to provide evidence to rebut this presumption and that mere retraction of the statement by filing an affidavit was not sufficient.

Similarly, in the case of Amplas Polymers Pvt. Ltd., a survey was conducted, and a similar Excel printout showing share transactions was found. The AO added ?97,01,500 as speculative profit based on the statement of one of the directors, Mr. Shailesh Shah. The CIT(A) confirmed this addition, citing similar reasons as in the case of Shreeji Transport Services Pvt. Ltd.

The Tribunal reviewed the facts and circumstances of both cases. It was noted that the printouts did not indicate the names of the assessees or any details of the transactions, such as the names of the companies, types of securities, names of parties involved, or details of payments. The Tribunal found that the documents were created on the same day, and there was no corroborative evidence to support the alleged transactions. The Tribunal concluded that the documents were "dumb documents" and could not be used as a basis for making additions. Therefore, the additions of ?1,28,60,500 and ?97,01,500 were deleted, and the appeals on these issues were allowed.

Conclusion:

In conclusion, the Tribunal allowed both appeals, deleting the additions of ?90,000, ?1,28,60,500, and ?97,01,500, as the evidence provided by the Revenue was found to be insufficient and unreliable.

Order Pronounced:

Order pronounced in the open court on 26-11-2019.