2020 (3) TMI 1071 - AT - Income Tax

Rectification u/s 254 - addition u/s. 153A - HELD THAT - Assessee has failed to rebut the presumptions u/s. 132(4) and 132(4A) of the Act and the clear incriminating material found. CIT(A) has accepted various reasoning of the assessee which put onus on the A.O. to prove that certain items which were imaginary and the explanation of the assessee which are clearly an afterthought, were actually sold and the sale proceed was received. Once the assessee has been found to have failed to disprove the presumption u/s. 132(4) and 132(4A) and the incriminating material found, the various other submissions of the assessee are imaginary and merely an afterthought. CIT(A) is referring to case laws which are not at all in the context of the addition u/s. 153A. These are old case laws prior to the insertion of section 153A. CIT(A) is even mentioning that even if the addition is based upon the books of accounts of the assessee, the same should not be done as the A.O. has not been able to prove that what is recorded in the books as per assessee s afterthought has actually been realized by the assessee. This, in our considered opinion, it is totally unsustainable in law. Accordingly, in the background of the afore-said discussion and precedent, we set aside the order of the ld. CIT(A) and restore that of the A.O. Addition on the basis of material found during search - Addition u/s 69 - Documents incriminating in nature were found in the search. From the materials referred by the assessing officer here-in-above it was clear that a sum of ₹ 1.81 crores has been paid which has not been accounted for. CIT-A has deleted the addition by making conjectures that assessee might have made further negotiations with the payees and settled the matter for an amount less than ₹ 1.81 crores - onus was upon the assessee to prove this in view of the materials found during search and the presumptions arising out of provisions of section 132(4A). Instead the learned CIT-A has put the onus on assessing officer to prove that the impugned sum was paid by other means by the assessee. In our considered opinion, the action of the learned CIT-A is clearly contrary to the mandate of provisions of section 132(4A) and the incriminating documents found. Hence, we set aside the order of learned CIT-A and restore that of the assessing officer. A reading of the above makes it clear that in this miscellaneous application assessee is seeking a review of the order of the ITAT in the garb of rectification of mistake apparent from record under section 254(2) of the income tax act. The assessee in its miscellaneous application is agitating the same points which have already been dealt with in the ITAT order.

Summary

Issues Involved:
1. Rectification of Mistake Apparent from Records under Section 254(2)
2. Rebuttal of Presumption under Sections 132(4) and 132(4A)
3. Reassessment of Income from Alleged Sales
4. Evidentiary Value of Documents Found During Search
5. Addition of ?1.81 Crores as Unexplained Investment

Issue-Wise Detailed Analysis:

1. Rectification of Mistake Apparent from Records under Section 254(2):
The assessee filed a miscellaneous application seeking rectification of mistakes in the ITAT's order dated 28.12.2018. The application argued that the ITAT erred by not considering the non-conclusiveness of accounting entries in determining taxable income and by wrongly observing that the presumption under Sections 132(4) and 132(4A) had been rebutted by the assessee. The Departmental Representative countered that the assessee was seeking a review rather than a rectification, which is not permissible under Section 254(2).

2. Rebuttal of Presumption under Sections 132(4) and 132(4A):
The ITAT found that the adverse inference against the assessee was based on both the Director's statement under Section 132(4) and incriminating documents found during the search. The tribunal emphasized that statements made under oath during a search have evidentiary value, as per Section 132(4), and documents found during a search are presumed to be true under Section 132(4A). The assessee's attempts to rebut these presumptions were deemed insufficient and afterthoughts.

3. Reassessment of Income from Alleged Sales:
The ITAT noted that the assessee had claimed that certain sales entries were wrong and made by inexperienced staff. However, the tribunal found this explanation implausible, given the magnitude of the errors and the lack of supporting evidence. The ITAT concluded that the assessee had failed to disprove the presumptions under Sections 132(4) and 132(4A) and that the incriminating material found during the search justified the additions made by the Assessing Officer (A.O.).

4. Evidentiary Value of Documents Found During Search:
The tribunal emphasized the evidentiary value of documents found during the search, including the profit and loss account and balance sheet signed by the Director. The ITAT dismissed the assessee's claim that these documents were prepared for obtaining higher bank credits, noting the absence of any evidence supporting this theory. The tribunal also rejected the explanation that the documents contained incorrect journal entries made by inexperienced staff, citing the improbability of such significant errors going undetected.

5. Addition of ?1.81 Crores as Unexplained Investment:
The A.O. had added ?1.81 crores as unexplained investment based on documents found during the search, which indicated payments related to a proposed development project. The CIT(A) had deleted this addition, suggesting that the assessee might have negotiated lower payments. However, the ITAT found this reasoning speculative and contrary to the provisions of Section 132(4A). The tribunal reinstated the A.O.'s addition, emphasizing that the onus was on the assessee to disprove the incriminating evidence.

Conclusion:
The ITAT dismissed the miscellaneous application filed by the assessee, concluding that the application was an attempt to seek a review rather than a rectification of the order. The tribunal upheld the additions made by the A.O., emphasizing the evidentiary value of the documents found during the search and the insufficiency of the assessee's rebuttal. The order was pronounced on 28.2.2020.